Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2015 | Jul. 31, 2015 | Dec. 31, 2014 | |
Document and Entity Information | |||
Entity Registrant Name | K12 INC | ||
Entity Central Index Key | 1,157,408 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 343,512,091 | ||
Entity Common Stock, Shares Outstanding | 38,304,395 | ||
Document Fiscal Year Focus | 2,015 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2015 | Jun. 30, 2014 |
Current assets | ||
Cash and cash equivalents | $ 195,852 | $ 196,109 |
Accounts receivable, net of allowance of $9,657 and $3,460 at June 30, 2015 and June 30, 2014, respectively. | 188,246 | 194,676 |
Inventories, net | 29,571 | 33,830 |
Deferred tax asset | 8,989 | 7,732 |
Prepaid expenses | 11,428 | 7,356 |
Other current assets | 24,877 | 25,498 |
Total current assets | 458,963 | 465,201 |
Property and equipment, net | 34,407 | 48,581 |
Capitalized software, net | 62,683 | 49,920 |
Capitalized curriculum development costs, net | 58,696 | 60,782 |
Intangible assets, net | 21,195 | 23,708 |
Goodwill | 66,160 | 58,088 |
Deposits and other assets | 6,495 | 5,387 |
Total assets | 708,599 | 711,667 |
Current liabilities | ||
Accounts payable | 29,819 | 30,976 |
Accrued liabilities | 12,486 | 20,539 |
Accrued compensation and benefits | 26,790 | 17,400 |
Deferred revenue | 24,927 | 24,353 |
Current portion of capital lease obligations | 16,635 | 20,492 |
Total current liabilities | 110,657 | 113,760 |
Deferred rent, net of current portion | 7,692 | 8,488 |
Capital lease obligations, net of current portion | 13,022 | 16,447 |
Deferred tax liability | 22,456 | 22,478 |
Other long term liabilities | 8,233 | 4,763 |
Total liabilities | $ 162,060 | $ 165,936 |
Commitments and contingencies | ||
Redeemable noncontrolling interest | $ 9,601 | $ 16,801 |
K12 Inc. stockholders' equity | ||
Common stock, par value $0.0001; 100,000,000 shares authorized; 41,837,894 and 41,144,062 shares issued and 38,335,296 and 38,948,866 shares outstanding at June 30, 2015 and June 30, 2014, respectively | 4 | 4 |
Additional paid-in capital | 663,461 | 639,036 |
Accumulated other comprehensive loss | (1,065) | (112) |
Accumulated deficit | (50,462) | (61,450) |
Treasury stock of 3,502,598 and 2,195,196 shares at cost at June 30, 2015 and June 30, 2014, respectively | (75,000) | (48,548) |
Total K12 Inc. stockholders' equity | 536,938 | 528,930 |
Total liabilities, redeemable noncontrolling interest and equity | $ 708,599 | $ 711,667 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2015 | Jun. 30, 2014 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance (in dollars) | $ 9,657 | $ 3,460 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 41,837,894 | 41,144,062 |
Common stock, shares outstanding | 38,335,296 | 38,948,866 |
Treasury stock, shares | 3,502,598 | 2,195,196 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
Revenues | $ 235,655 | $ 244,623 | $ 231,304 | $ 236,712 | $ 232,046 | $ 235,222 | $ 223,919 | $ 228,366 | $ 948,294 | $ 919,553 | $ 848,220 |
Cost and expenses | |||||||||||
Instructional costs and services | 166,900 | 148,985 | 145,029 | 146,842 | 142,053 | 140,592 | 153,672 | 132,902 | 607,756 | 569,219 | 498,398 |
Selling, administrative, and other operating expenses | 80,756 | 64,871 | 62,557 | 99,546 | 74,847 | 64,414 | 75,753 | 98,244 | 307,730 | 313,258 | 283,032 |
Product development expenses | 4,317 | 3,337 | 3,245 | 3,482 | 2,303 | 2,831 | 3,402 | 5,684 | 14,381 | 14,220 | 21,084 |
Total costs and expenses | 251,973 | 217,193 | 210,831 | 249,870 | 219,203 | 207,837 | 232,827 | 236,830 | 929,867 | 896,697 | 802,514 |
Income from operations | (16,318) | 27,430 | 20,473 | (13,158) | 12,843 | 27,385 | (8,908) | (8,464) | 18,427 | 22,856 | 45,706 |
Realized gain on sale of assets | 6,404 | 6,404 | |||||||||
Interest (expense) income, net | (3,158) | (315) | 151 | 31 | 55 | (12) | (28) | (84) | (3,291) | (69) | 851 |
Income before income tax expense and noncontrolling interest | (19,476) | 27,115 | 20,624 | (13,127) | 19,302 | 27,373 | (8,936) | (8,548) | 15,136 | 29,191 | 46,557 |
Income tax expense | 6,901 | (10,586) | (8,663) | 6,538 | (7,349) | (11,861) | 4,685 | 3,450 | (5,810) | (11,075) | (20,023) |
Net income | (12,575) | 16,529 | 11,961 | (6,589) | 11,953 | 15,512 | (4,251) | (5,098) | 9,326 | 18,116 | 26,534 |
Add net loss attributable to noncontrolling interest | 995 | 484 | 370 | (187) | 403 | 437 | 586 | 58 | 1,662 | 1,484 | 1,577 |
Net income attributable to common stockholders, including Series A stockholders | $ (11,580) | $ 17,013 | $ 12,331 | $ (6,776) | $ 12,356 | $ 15,949 | $ (3,665) | $ (5,040) | $ 10,988 | $ 19,600 | $ 28,111 |
Net income attributable to common stockholders per share, excluding Series A stockholders: | |||||||||||
Basic (in dollars per share) | $ (0.31) | $ 0.46 | $ 0.33 | $ 0.18 | $ 0.32 | $ 0.40 | $ (0.09) | $ (0.13) | $ 0.29 | $ 0.50 | $ 0.72 |
Diluted (in dollars per share) | $ (0.31) | $ 0.45 | $ 0.33 | $ 0.18 | $ 0.32 | $ 0.40 | $ (0.09) | $ (0.13) | $ 0.29 | $ 0.50 | $ 0.72 |
Weighted average shares used in computing per share amounts: | |||||||||||
Basic (in shares) | 37,318,085 | 37,211,634 | 37,096,480 | 37,695,681 | 38,540,464 | 39,596,798 | 39,977,228 | 37,868,928 | 37,330,569 | 38,987,470 | 36,267,345 |
Diluted (in shares) | 37,318,085 | 37,408,911 | 37,160,829 | 37,695,681 | 38,742,379 | 39,596,798 | 39,977,228 | 37,868,928 | 37,625,425 | 39,230,516 | 39,017,345 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income | $ 9,326 | $ 18,116 | $ 26,534 |
Other comprehensive (loss) income, net of tax | |||
Foreign currency translation adjustment | (953) | 182 | (394) |
Total other comprehensive income, net of tax | 8,373 | 18,298 | 26,140 |
Comprehensive loss attributable to noncontrolling interest | 1,662 | 1,484 | 1,577 |
Comprehensive income attributable to common stockholders, including Series A stockholders | $ 10,035 | $ 19,782 | $ 27,717 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Treasury Stock | Noncontrolling Interest | Common Stock - A | Total | |
Balance at Jun. 30, 2012 | $ 4 | $ 519,439 | $ 100 | $ (109,161) | $ 4,154 | $ 63,112 | $ 477,648 | ||
Balance (in shares) at Jun. 30, 2012 | 36,436,933 | 2,750,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | [1] | 28,111 | (558) | 27,553 | |||||
Foreign currency translation adjustment | (394) | (394) | |||||||
Stock-based compensation expense | 14,374 | 14,374 | |||||||
Exercise of stock options | 7,253 | 7,253 | |||||||
Exercise of stock options (in shares) | 437,054 | ||||||||
Excess tax benefit (expense) from stock-based compensation | 8,889 | 8,889 | |||||||
Issuance of restricted stock awards (in shares) | 768,951 | ||||||||
Forfeiture of restricted stock awards (in shares) | (86,142) | ||||||||
Accretion of redeemable noncontrolling interests to estimated redemption value | 981 | 981 | |||||||
Retirement of restricted stock for tax withholding | (2,546) | (2,546) | |||||||
Retirement of restricted stock for tax withholding (in shares) | (116,134) | ||||||||
Balance at Jun. 30, 2013 | $ 4 | 548,390 | (294) | (81,050) | 3,596 | $ 63,112 | 533,758 | ||
Balance (in shares) at Jun. 30, 2013 | 37,440,662 | 2,750,000 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | [1] | 19,600 | (209) | 19,391 | |||||
Foreign currency translation adjustment | 182 | 182 | |||||||
Conversion of Series A to Common Stock | 63,112 | $ (63,112) | |||||||
Conversion of Series A to Common Stock (in shares) | 2,750,000 | (2,750,000) | |||||||
Purchase of treasury stock | $ (48,548) | (48,548) | |||||||
Purchase of treasury stock (in shares) | (2,195,196) | ||||||||
Stock-based compensation expense | 22,828 | 22,828 | |||||||
Exercise of stock options | 10,294 | 10,294 | |||||||
Exercise of stock options (in shares) | 531,262 | ||||||||
Excess tax benefit (expense) from stock-based compensation | 1,075 | 1,075 | |||||||
Issuance of restricted stock awards (in shares) | 704,131 | ||||||||
Forfeiture of restricted stock awards (in shares) | (93,423) | ||||||||
Accretion of redeemable noncontrolling interests to estimated redemption value | (1,645) | (1,645) | |||||||
Retirement of restricted stock for tax withholding | (5,018) | (5,018) | |||||||
Retirement of restricted stock for tax withholding (in shares) | (188,570) | ||||||||
Deconsolidation of certain business | $ (3,387) | (3,387) | |||||||
Balance at Jun. 30, 2014 | $ 4 | 639,036 | (112) | (61,450) | $ (48,548) | 528,930 | |||
Balance (in shares) at Jun. 30, 2014 | 41,144,062 | (2,195,196) | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | [1] | 10,988 | 10,988 | ||||||
Foreign currency translation adjustment | (953) | (953) | |||||||
Purchase of treasury stock | $ (26,452) | $ (26,452) | |||||||
Purchase of treasury stock (in shares) | (1,307,402) | (1,307,402) | |||||||
Stock-based compensation expense | 21,299 | $ 21,299 | |||||||
Exercise of stock options | 553 | 553 | |||||||
Exercise of stock options (in shares) | 99,935 | ||||||||
Excess tax benefit (expense) from stock-based compensation | (2,793) | (2,793) | |||||||
Issuance of restricted stock awards (in shares) | 822,698 | ||||||||
Forfeiture of restricted stock awards (in shares) | (66,480) | ||||||||
Accretion of redeemable noncontrolling interests to estimated redemption value | 8,038 | 8,038 | |||||||
Retirement of restricted stock for tax withholding | (2,672) | (2,672) | |||||||
Retirement of restricted stock for tax withholding (in shares) | (162,321) | ||||||||
Balance at Jun. 30, 2015 | $ 4 | $ 663,461 | $ (1,065) | $ (50,462) | $ (75,000) | $ 536,938 | |||
Balance (in shares) at Jun. 30, 2015 | 41,837,894 | (3,502,598) | |||||||
[1] | Net loss attributable to noncontrolling interest excludes $1.7Â million, $1.3Â million and $1.0Â million for the years ended June 30, 2015, 2014 and 2013, respectively, due to the redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop, which is reported outside of permanent equity in the consolidated balance sheet (See Note 10). |
CONSOLIDATED STATEMENTS OF STO7
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||
Redeemable noncontrolling interest related to Middlebury Interactive Languages and LearnBop | $ 1.7 | $ 1.3 | $ 1 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Cash flows from operating activities | |||
Net income | $ 9,326 | $ 18,116 | $ 26,534 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization expense | 83,801 | 86,267 | 65,737 |
Stock-based compensation expense | 21,299 | 22,828 | 14,374 |
Excess tax benefit from stock-based compensation | (118) | (1,679) | (9,795) |
Deferred income taxes | (3,094) | (5,754) | 15,770 |
Provision for doubtful accounts | 9,300 | 1,439 | 2,070 |
Provision for inventory obsolescence | 1,406 | 4,293 | 387 |
Provision for student computer shrinkage and obsolescence | (430) | (526) | 482 |
Impairment loss on other assets | 3,200 | ||
Realized gain on sale of assets | (6,404) | ||
Changes in assets and liabilities: | |||
Accounts receivable | (1,892) | (12,257) | (27,708) |
Inventories | 2,853 | 6,272 | (6,929) |
Prepaid expenses | (4,073) | 2,735 | 843 |
Other current assets | (2,579) | (1,645) | 682 |
Deposits and other assets | (1,440) | (212) | (466) |
Accounts payable | (1,192) | 9,778 | (2,115) |
Accrued liabilities | (7,854) | 5,474 | 3,226 |
Accrued compensation and benefits | 9,389 | (4,214) | 4,616 |
Deferred revenue | 621 | (1,429) | 3,119 |
Restricted cash | 1,501 | ||
Deferred rent | 1,562 | (209) | 2,059 |
Net cash provided by operating activities | 120,085 | 122,873 | 94,387 |
Cash flows from investing activities | |||
Purchase of property and equipment | (9,928) | (7,405) | (8,339) |
Capitalized software development costs | (33,755) | (26,553) | (23,446) |
Capitalized curriculum development costs | (18,057) | (15,411) | (18,560) |
Mortgage note to managed school partner | (2,100) | ||
Net cash received on sale of assets | 5,665 | ||
Acquisition of LearnBop Inc. | (6,512) | ||
Net cash used in investing activities | (68,252) | (45,804) | (50,345) |
Cash flows from financing activities | |||
Repayments on capital lease obligations | (21,939) | (22,694) | (20,275) |
Repayments on notes payable | (390) | (1,533) | |
Purchase of treasury stock | (26,452) | (48,548) | |
Proceeds from exercise of stock options | 553 | 10,294 | 7,253 |
Net proceeds from investment in noncontrolling interest | 1,275 | ||
Excess tax benefit from stock-based compensation | 118 | 1,679 | 9,795 |
Retirement of restricted stock for tax withholding | (2,672) | (5,018) | (2,546) |
Net cash used in financing activities | (50,392) | (63,402) | (7,306) |
Effect of foreign exchange rate changes on cash and cash equivalents | (1,698) | 962 | 92 |
Net change in cash and cash equivalents | (257) | 14,629 | 36,828 |
Cash and cash equivalents, beginning of year | 196,109 | 181,480 | 144,652 |
Cash and cash equivalents, end of year | $ 195,852 | $ 196,109 | $ 181,480 |
Description of the Business
Description of the Business | 12 Months Ended |
Jun. 30, 2015 | |
Description of the Business | |
Description of the Business | 1. Description of the Business K12 Inc., together with its subsidiaries ("K 12 " or the "Company"), is a technology-based education company. The Company offers proprietary curriculum, software systems and educational services designed to facilitate individualized learning for students primarily in kindergarten through 12th grade ("K-12"). The Company's mission is to maximize a child's potential by providing access to an engaging and effective education, regardless of geographic location or socio-economic background. The Company's learning systems combine curriculum, instruction and related support services to create an individualized learning approach well-suited for virtual and blended public schools, public school districts, public charter schools and private schools that utilize varying degrees of online and traditional classroom instruction, and other educational applications. These unique set of products and services are provided primarily to three lines of business: Public School Programs (curriculum and services sold to managed and non-managed public schools), Institutional Sales (educational products and services provided to school districts, public schools and other educational institutions that the Company does not manage), and International and Private Pay Schools (private schools for which the Company charges student tuition and makes direct consumer sales). In school year 2014-15, the Company managed public schools in 32 states and the District of Columbia. In June 2014, the Company completed a sale of certain businesses, including the International School of Berne. The other businesses divested consisted of the Company's interest in an existing Middle East joint venture and its post-secondary business. The Company works closely as partners with a growing number of public schools, public school districts, public charter schools and private schools enabling them to offer their students an array of solutions, including full-time virtual programs, semester course and supplemental solutions. In addition to curriculum, systems and programs, the Company provides teacher training, teaching services and other support services. |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Jun. 30, 2015 | |
Basis of Presentation | |
Basis of Presentation | 2. Basis of Presentation The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and all controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company operates in one operating and reportable business segment as a technology-based education company providing proprietary curriculum, software systems and educational services designed to facilitate individualized learning for students primarily in kindergarten through 12th grade. The Chief Operating Decision Maker evaluates profitability based only on consolidated results. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to allowance for doubtful accounts, inventory reserves, amortization periods, the allocation of purchase price to the fair value of net assets and liabilities acquired in business combinations, fair values used in asset impairment evaluations, valuation of long-lived assets, fair value of redeemable noncontrolling interest, contingencies, income taxes and stock-based compensation expense. The Company bases its estimates on historical experience and various assumptions that it believes are reasonable under the circumstances. The results of the analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. Revenue Recognition and Concentration of Revenues Revenues are principally earned from long-term contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended public schools, traditional schools, school districts, virtual charter schools, and private schools. In addition to providing the curriculum, books and materials, under most contracts, the Company provides management services and technology to virtual and blended public schools, including monitoring academic achievement, teacher hiring and training, compensation of school personnel, financial management, enrollment processing and procurement of curriculum, equipment and required services. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenues. Where the Company has determined that it is the primary obligor for substantially all expenses under these contracts, the Company records the associated per student revenue received by the school from its state funding school district up to the expenses incurred in accordance with Accounting Standards Codification ("ASC") 605, Revenue Recognition . As a result of being the primary obligor, amounts recorded as revenues and school operating expenses for the years ended June 30, 2015, 2014 and 2013 were $338.2 million, $265.2 million and $247.1 million, respectively. For contracts where the Company is not the primary obligor, the Company records revenue based on its net fees earned under the contractual agreement. The Company generates revenues under turnkey management contracts with virtual and blended public schools which include multiple elements. These elements include providing each of a school's students with access to the Company's online school and the component of lessons; offline learning kits, which include books and materials to supplement the online lessons, where required, the use of a personal computer and associated reclamation services; internet access and technology support services; the services of a state-certified teacher, where required; and management and technology services necessary to operate a virtual public or blended school. In certain managed school contracts, revenue is determined directly by per enrollment funding. The Company has determined that the elements of its contracts are valuable to schools in combination, but do not have standalone value. As a result, the elements within the Company's multiple-element contracts do not qualify as separate units of accounting. Accordingly, the Company accounts for revenues under multiple element arrangements as a single unit of accounting and recognizes the entire arrangement based upon the approximate rate at which it incurs the costs associated with each element. Revenue from certain managed schools is recognized ratably over the period services are performed. To determine the pro rata amount of revenues to recognize in a fiscal quarter, management estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels which are generally published on an annual basis by the state or school district. Management reviews its estimates of funding periodically, and revise as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company's results of operations. Since the end of the school year coincides with the end of the Company's fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company's services to the schools plus other costs the schools may incur) in the calculation of school operating losses. The Company's schools reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company's monthly funding estimates and for the reported fiscal years ended June 30, 2014, 2013 and 2012, the Company's aggregate funding estimates differed from actual reimbursements impacting total reported revenue by approximately (0.1%), 0.2%, and (0.1%), respectively. Under the contracts where the Company provides turnkey management services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenue and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company's ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. For turnkey revenue service contracts, a school operating loss may reduce the Company's ability to collect its management fees in full though as noted it does not necessarily mean that the Company incurs a loss during the period with respect to its services to that school. The Company recognizes revenue, net of its estimated portion of school operating losses, to reflect the expected cash collections from such schools. Revenue is recognized based on the Company's performance of services under the contract, which it believes is proportionate to its incurrence of costs. The Company incurs costs directly related to the delivery of services. Most of these costs are recognized throughout the year; however, certain costs related to upfront delivery of printed materials, workbooks, laboratory materials and other items are provided at the beginning of the school year and are recognized as expense when shipped. Each state or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company builds the funding estimates for each school, it is mindful of the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding. The estimates the Company makes each period on a school-by-school basis takes into account the latest information available to it and considers material relevant information at the time of the estimate. Management periodically reviews its estimates of full-year school revenues and operating expenses and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. Since the end of the school year coincides with the end of the Company's fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company's services to the schools plus other costs the schools may incur) in the calculation of school operating losses. For the years ended June 30, 2015, 2014 and 2013, the Company's revenue included a reduction for these school operating losses of $65.2 million, $49.8 million, and $64.5 million, respectively. The Company provides certain online curriculum and services to schools and school districts under subscription and perpetual license agreements. Revenue under these agreements is recognized in accordance with the ASC 605 when all of the following conditions are met: there is persuasive evidence of an arrangement; delivery has occurred or services have been rendered; the amount of fees to be paid by the customer is fixed and determinable; and the collectability of the fee is probable. Revenue from the licensing of curriculum under subscription arrangements is recognized on a ratable basis over the subscription period. Revenue from the licensing of curriculum under non-cancelable perpetual arrangements is recognized when all revenue recognition criteria have been met. Revenue from professional consulting, training and support services are deferred and recognized ratably over the service period. Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. The Company recognizes these revenues pro rata over the maximum term of the customer contract. Revenues from associated offline learning kits are recognized upon shipment. During the years ended June 30, 2015, 2014 and 2013, approximately 86%, 88% and 86%, respectively, of the Company's revenues were recognized from schools the Company managed. The Company had a contract with one school that represented approximately 14% of revenue during 2015, approximately 13% of revenue in 2014 and about 14% of revenue in 2013. Approximately 9% of accounts receivable was attributable to a contract with one school as of June 30, 2015 and 2014, respectively. In fiscal year 2015, Agora renegotiated its service agreement and entered into a three-year contract with the Company to purchase the Company's curriculum and certain technology services, while the school board assumed daily operational responsibilities, including its charter renewal process and marketing and enrollment activities. The negative impact of this event on revenues attributable to the loss of the management component of the Agora contract, while significant, will be dependent upon the number of enrollments Agora can generate independently and the funding rates approved by the Pennsylvania legislature for cyber-charter schools in fiscal year 2016. Reclassifications The Company has reclassified certain prior year income tax classifications to conform to the current year presentation. There was no effect on related income tax assets or liabilities, or the income statement from such reclassification. The reclassification had no effect on net cash flows. Shipping and Handling Costs Shipping and handling costs are expensed when incurred and are classified as instructional costs and services in the accompanying consolidated statements of operations. Shipping and handling charges invoiced to a customer are included in revenues. Research and Development Costs All research and development costs, including patent application costs, are expensed as incurred. Cash and Cash Equivalents Cash and cash equivalents generally consist of cash on hand and cash held in money market and demand deposit accounts. The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Allowance for Doubtful Accounts The Company maintains an allowance for uncollectible accounts primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company analyzes accounts receivable, historical percentages of uncollectible accounts and changes in payment history when evaluating the adequacy of the allowance for uncollectible accounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Actual write-offs might exceed the recorded allowance. Inventories Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual and blended public schools and utilized directly by students. Inventories represent items that are purchased and are recorded at the lower of cost (first-in, first-out method) or market value. Excess and obsolete inventory reserves are established based upon the evaluation of the quantity on hand relative to demand. During the years ended June 30, 2015 and 2014, the Company increased the provision for excess and obsolete inventory by $1.4 million and $4.2 million primarily related to the decision to discontinue certain products and excess inventory relative to anticipated demand. The excess and obsolete inventory reserve at June 30, 2015 and 2014 was $2.2 million and $9.1 million, respectively. The reduction in the reserve during the year ended June 30, 2015 is primarily due to the disposal of previously reserved inventory. Other Current Assets Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation and amortization expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases , as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured. Property and equipment are depreciated over the following useful lives: Useful Life Student computers 3 years Computer hardware 3 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements 3 - 12 years During the year ended June 30, 2014, the Company updated the estimate of unreturned student computers based on an analysis of recent trends of returns and utilization rates, as well as information obtained from the student computer processing systems. As a result, during the year ended 2014 the Company recorded accelerated depreciation of $6.5 million for computers that the Company estimates will not be returned by students. During the year ended June 30, 2015, the Company continued to perform this analysis and as a result recorded $5.0 million in accelerated depreciation related to this estimate. The Company recorded no accelerated depreciation related to these estimates for the year ended June 30, 2013. In addition, during the year ended June 30, 2015, the Company wrote down approximately $4.8 million of capitalized software projects after determining the assets either have no future use or are being sunset. Further, during the fiscal year ended June 30, 2015, the Company wrote down approximately $6.5 million primarily related to computer peripherals and other fixed assets shipped to students, and for which no reclamation will be processed. The Company recorded no such write-downs during the year ended June 30, 2013. Capitalized Software The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles—Goodwill and Other . The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization. Capitalized software development additions totaled $33.8 million, $26.6 million and $23.4 million for the years ended June 30, 2015, 2014 and 2013, respectively. During the year ended June 30, 2014, the Company wrote down approximately $3.8 million of capitalized software projects after determining the assets either have no future use or are being sunset. There were no material write-downs of capitalized software projects for the year ended June 30, 2013. Amortization expense for the years ended June 30, 2015, 2014 and 2013 was $26.8 million, $20.1 million and $14.7 million, respectively. Capitalized Curriculum Development Costs The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. Many of the Company's new courses leverage off of proven delivery platforms and are primarily content, which has no technological hurdles. As a result, a significant portion of the Company's courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs will be amortized is generally five years. Total capitalized curriculum development additions were $18.1 million, $15.4 million and $18.6 million for the years ended June 30, 2015, 2014 and 2013, respectively. These amounts are recorded on the accompanying consolidated balance sheets, net of amortization and impairment charges. Amortization charges are recorded in instructional costs and services on the accompanying consolidated statements of operations. Amortization expense for the years ended June 30, 2015, 2014 and 2013 was $20.1 million, $19.0 million and $14.3 million, respectively. The Company wrote down approximately $2.6 million and $2.2 million of capitalized curriculum development costs due to an assessment of recoverability of certain curriculum, as well as a decision to discontinue certain curriculum during the years ended June 30, 2015 and 2014. There were no material write-downs of capitalized curriculum development costs for the year ended June 30, 2013. Noncontrolling Interest Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as "noncontrolling interest" in the Company's consolidated statements of operations. Net loss attributable to noncontrolling interest reflects only its share of the after-tax earnings or losses of an affiliated company. Income taxes attributable to noncontrolling interest are determined using the applicable statutory tax rates in the jurisdictions where such operations are conducted. The Company's consolidated balance sheets reflect noncontrolling interests within the equity section of the consolidated balance sheets, except for redeemable noncontrolling interests. Noncontrolling interest was classified separately in the Company's consolidated statements of stockholders' equity. Except for the redeemable non-controlling interests, the businesses with non-controlling interests were sold during fiscal 2014, and therefore the Company no longer has these non-controlling interests after the sale date. Redeemable Noncontrolling Interests Noncontrolling interests in subsidiaries that are redeemable outside of the Company's control for cash or other assets are classified outside of permanent equity at redeemable value, which approximates fair value. However, if the redemption amount is other than fair value (e.g. fixed or variable), the redeemable noncontrolling interest is accounted for at the fixed or variable redeemable value. The redeemable noncontrolling interests are adjusted to their redeemable value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in-capital. Goodwill and Intangible Assets The Company records as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. As of June 30, 2015 and 2014, finite-lived intangible assets were recorded at $37.4 million and $37.4 million, respectively, and accumulated amortization of $16.2 million and $13.7 million, respectively. Amortization expense for the years ended June 30, 2015, 2014 and 2013 was $2.6 million, $8.0 million and $4.6 million, respectively. During the year ended June 30, 2014, the Company determined that based on rebranding of the Institutional Sales business, the Company fully amortized certain trade names that are no longer going to be used and recorded a $5.2 million impairment charge. There was no material impairment charge for the years ended June 30, 2015 and 2013. Future amortization of intangible assets is $2.5 million, $1.9 million, $1.9 million, $1.9 million and $1.9 million in the years ended June 30, 2016 through June 30, 2020, respectively and $10.7 million thereafter. As of June 30, 2015 and 2014, the goodwill balance was $66.2 million and $58.1 million, respectively. The Company reviews its recorded finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. ASC 350 prescribes a two-step process for impairment testing of goodwill and intangibles with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as "Step 0". Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. The Company has elected to perform its annual assessment on May 31st. The Step 0 analysis focused on a number of events and circumstances that may be considered when making this qualitative assessment. Upon careful consideration of these events and circumstances, the Company recorded no goodwill impairment for the years ended June 30, 2015, 2014 and 2013. As a result of the sale of the business assets during the fiscal year ended June 30, 2014, the Company wrote off goodwill of $3.4 million and net intangibles of $0.4 million associated with these entities. On July 31, 2014, the Company acquired a 51% majority interest in LearnBop Inc. ("LearnBop"), for $6.6 million in cash (see Note 10). The following table represents goodwill additions/reductions during fiscal years ended June 30, 2015, 2014 and 2013: ($ in millions) Amount Goodwill Balance as of June 30, 2013 $ Sale of business assets ) Adjustments due to other foreign exchange translations ​ ​ ​ ​ ​ Balance as of June 30, 2014 $ Acquisition of LearnBop ​ ​ ​ ​ ​ Balance as of June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Intangible Assets : 2015 2014 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ $ ) $ $ $ ) $ Customer and distributor relationships ) ) Developed technology ) — ) — Other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ $ ) $ $ $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ During fiscal year ended 2014, the Company determined that based on the rebranding of the Institutional business, the Company fully amortized certain trade names that were no longer going to be used and recorded a $5.2 million impairment charge. There were no such impairment charges during fiscal years ended June 30, 2015 and 2013. Impairment of Long-Lived Assets Long-lived assets include property, equipment, capitalized curriculum and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment , management reviews the Company's recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset's future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes . Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Sales Taxes Sales tax collected from customers is excluded from revenues. Collected but unremitted sales tax is included as part of accrued liabilities in the accompanying consolidated balance sheets. Revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales tax. Stock-Based Compensation The Company estimates the fair value of share-based awards on the date of grant. The fair value of stock options is determined using the Black-Scholes option-pricing model and the fair value of restricted stock awards is based on the closing price of the Company's common stock on the date of grant. The determination of the fair value of the Company's stock option awards and restricted stock awards is based on a variety of factors including, but not limited to, the Company's common stock price, expected stock price volatility over the expected life of awards, and actual and projected exercise behavior. Additionally, the Company has estimated forfeitures for share-based awards at the dates of grant based on historical experience, adjusted for future expectation. The forfeiture estimate is revised as necessary if actual forfeitures differ from these estimates. Advertising and Marketing Costs Advertising and marketing costs consist primarily of internet advertising, online marketing, direct mail, print media and television commercials and are expensed when incurred. Series A Special Stock The Company issued 2,750,000 shares of Series A Special stock in July 2010 in connection with an acquisition. The holders of the Series A Special stock had the right to convert those shares into common stock on a one-for-one basis and the right to vote on all matters presented to K12 stockholders, other than for the election and removal of directors, for which holders of the Series A Special stock had no voting rights. These shares were converted into common stock on September 3, 2013 and no Series A Special stock were outstanding as of June 30, 2015 and June 30, 2014. Net Income Per Common Share The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share . Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share ("EPS") reflect the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded in additional paid-in capital when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company's common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are antidilutive. Common stock outstanding reflected in the Company's consolidated balance sheets include restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities. Since the Series A Shares participate in all dividends and distributions declared or paid with respect to common stock of the Company (as if a holder of common stock), the Series A Shares meet the definition of participating security under ASC 260. All securities that meet the definition of a participating security, regardless of whether the securities are convertible, non-convertible or potential common stock securities, are included in the computation of both basic and diluted EPS (as a reduction of the numerator) using the two-class method. Under the two-class method, all undistributed earnings in a period are to be allocated to common stock and participating securities to the extent that each security may share in earnings as if all of the earnings for the period had been distributed. The following schedule presents the calculation of basic and diluted net income per share: Year Ended June 30, 2015 2014 2013 (In thousands except shares and per share data) Basic earnings per share computation: Net income attributabl |
Property and Equipment and Capi
Property and Equipment and Capitalized Software | 12 Months Ended |
Jun. 30, 2015 | |
Property and Equipment and Capitalized Software | |
Property and Equipment and Capitalized Software | 4. Property and Equipment and Capitalized Software Property and equipment consist of the following at: June 30, 2015 2014 (In thousands) Student computers $ $ Computer software Computer hardware Leasehold improvements Office equipment Furniture and fixtures Web site development costs State Testing computers — ​ ​ ​ ​ ​ ​ ​ ​ Less accumulated depreciation and amortization ) ) ​ ​ ​ ​ ​ ​ ​ ​ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company recorded depreciation expense related to property and equipment reflected in selling, administrative and other operating expenses of $6.0 million, $9.4 million and $9.8 million during the years ended June 30, 2015, 2014 and 2013, respectively. Depreciation expense of $27.5 million, $28.1 million and $21.0 million related to computers leased to students is reflected in instructional costs and services during the years ended June 30, 2015, 2014 and 2013, respectively. During the year ended June 30, 2015, the Company wrote down approximately $4.8 million of capitalized software projects after determining the assets either have no future use or are being sunset. Amortization expense of $0.9 million, $1.7 million and $1.4 million related to student software costs is reflected in instructional costs and services during the years ended June 30, 2015, 2014 and 2013, respectively. In the course of its normal operations, the Company incurs maintenance and repair expenses. Those are expensed as incurred and amounted to $11.2 million, $10.2 million and $8.1 million for the years ended June 30, 2015, 2014 and 2013, respectively. Capitalized software consists of the following at: June 30, 2015 2014 (In thousands) Capitalized software costs $ $ Less accumulated depreciation and amortization ) ) ​ ​ ​ ​ ​ ​ ​ ​ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company recorded amortization expense of $19.4 million, $18.2 million and $12.2 million related to capitalized software development reflected in instructional costs and services during the years ended June 30, 2015, 2014 and 2013, respectively. Amortization expense of zero, zero and $0.8 million related to capitalized software development was reflected in product development expenses during the years ended June 30, 2015, 2014 and 2013, respectively. The Company recorded amortization of capitalized software development costs reflected in selling, administrative and other operating expenses of $7.4 million, $1.9 million and $1.7 million during the years ended June 30, 2015, 2014 and 2013, respectively. During the year ended June 30, 2014, the Company wrote down approximately $3.8 million of capitalized software projects after determining the assets either have no future use or are being sunset. There were no material write-downs of capitalized software costs for the years ended June 30, 2015 and 2013. |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2015 | |
Income Taxes | |
Income Taxes | 5. Income Taxes The provision for income taxes is based on earnings reported in the consolidated financial statements. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversal of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. Deferred income tax expense or benefit is measured by the change in the deferred income tax asset or liability during the year. Deferred tax assets and liabilities result primarily from temporary differences in book versus tax basis accounting. Deferred tax assets and liabilities consist of the following: June 30, 2015 2014 (In thousands) Deferred tax assets (liabilities): Net operating loss carryforward $ $ Reserves Accrued expenses Stock compensation expense Other assets Deferred rent Deferred revenue Tax basis intangibles — Federal tax credits State tax credits ​ ​ ​ ​ ​ ​ ​ ​ Total deferred tax assets ​ ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities Capitalized curriculum development ) ) Capitalized software and website development costs ) ) Property and equipment ) ) Investment in Middlebury Interactive Languages ) ) Returned materials ) ) Purchased intangibles ) ) ​ ​ ​ ​ ​ ​ ​ ​ Total deferred tax liabilities ) ) ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax liability before valuation allowance ) ) Valuation Allowance ) ) ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax liability $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported as: Current deferred tax assets $ $ Long-term deferred tax liabilities ) ) ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax liability $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company maintains a valuation allowance on net deferred tax assets of $2.8 million and $2.0 million as of June 30, 2015 and 2014, respectively, predominantly related to state and foreign income tax net operating losses ("NOL") as the Company does not believe it is more likely than not that it will utilize these deferred tax assets. The Company adjusted its valuation allowance for the year ended June 30, 2015 due to the reduction of state operating losses, partially offset by the increase of foreign operating losses. The Company has not provided for U.S. deferred income taxes on undistributed foreign earnings because such earnings are considered to be permanently reinvested. Undistributed earnings of certain consolidated foreign subsidiaries at June 30, 2015 amounted to $16.2 million. If such earnings were not permanently reinvested, a U.S. deferred income tax liability of approximately $6.5 million would have been required. At June 30, 2015, the Company had available federal NOL carryforwards of $2.9 million. These NOLs expire in 2021 if unused. For the years ended June 30, 2015 and 2014, the Company has evaluated whether a change in the Company's ownership of outstanding classes of stock as defined in Internal Revenue Code Section 382 could prohibit or limit the Company's ability to utilize its NOLs. As a result of this study, the Company has concluded it is more likely than not that the Company will be able to fully utilize its NOLs subject to the Section 382 limitation. The related components of the income tax expense for the years ended June 30, 2015, 2014 and 2013 were as follows: Year Ended June 30, 2015 2014 2013 (In thousands) Current: Federal $ $ $ State Foreign ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current Deferred: Federal ) ) State ) ) ) Foreign ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deferred ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total income tax expense $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The provision for income taxes can be reconciled to the income tax that would result from applying the statutory rate to the net income before income taxes as follows: Year Ended June 30, 2015 2014 2013 U.S. federal tax at statutory rates % % % Permanent items Lobbying ) Transaction costs — ) State taxes, net of federal benefit Research and development tax credits ) ) ) Domestic production activities deduction ) ) — Change in valuation allowance — Effects of foreign operations ) ) Reserve for unrecognized tax benefits Noncontrolling Interests Other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes % % % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The effective income tax rates during the years ended June 30, 2015, 2014 and 2013 were 38.4%, 37.9%, and 43.0%, respectively. The primary causes of the changes in the effective tax rate were provision true-ups and additional tax benefits related to research activities of the Company, offset by additional reserves related to prior year tax positions. Tax Uncertainties The Company follows the provisions of ASC 740-10 which applies to all tax positions related to income taxes. ASC 740-10 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740-10 clarifies accounting for income taxes by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. If the probability for sustaining a tax position is greater than 50%, then the tax position is warranted and recognition should be at the highest amount which would be expected to be realized upon ultimate settlement. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. At June 30, 2015, the Company had $0.2 million in interest and penalties accrued. Year Ended June 30, 2015 2014 2013 (In thousands) Balance at beginning of the year $ $ $ Additions for prior year tax positions Additions for current year tax positions Reductions for prior year tax positions ) — — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at end of the year $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The Company or one of its subsidiaries files income tax returns in the U.S. federal, foreign and various state jurisdictions. Given the federal and certain state net operating losses generated in prior years, the statute of limitations for all tax years beginning with the period ended December 31, 2001 are still open. The statute of limitations for certain states for certain subsidiaries that have generated income may only extend back to 2010. The returns of the foreign subsidiaries are open to examination for the periods dating back to 2010. If recognized, all of the $3.6 million balance of unrecognized tax benefits would affect the effective tax rate. It is reasonably expected that unrecognized tax benefits related to income tax issues may change by a significant amount over the next twelve months. |
Lease Commitments
Lease Commitments | 12 Months Ended |
Jun. 30, 2015 | |
Lease Commitments | |
Lease Commitments | 6. Lease Commitments Capital Leases The Company incurs capital lease obligations for student computers under a lease line of credit with PNC Equipment Finance, LLC with annual borrowing limits. The Company had annual borrowing availability under the lease line of credit of $35.0 million as of June 30, 2015 and 2014, respectively. As of June 30, 2015 and 2014, the aggregate outstanding balance under the lease line of credit, including balances from prior years, was $29.7 million and $36.9 million, respectively, with lease interest rates ranging from 2.49% to 3.08%. Individual leases under the lease line of credit include 36-month payment terms with a $1 purchase option at the end of each lease term. The Company has pledged the assets financed to secure the outstanding leases. The lease line of credit was subject to cross default compliance provisions in the Company's line of credit agreement with PNC Bank, N.A. (see Note 7). The net carrying value of leased student computers as of June 30, 2015 and 2014 was $12.9 million and $20.9 million, respectively. The Company incurs capital lease obligations for student computers under a lease line of credit with PNC Equipment Finance, LLC with annual lease availability limits. The Company had $35.0 million of availability for new leasing during fiscal year 2015. Interest rates on the new borrowings were based upon an initial rate of 2.34% modified by changes in the three year interest rate swaps rate as published in the Federal Reserve Statistical Release H.15, "Selected Interest Rates," between June 25, 2014 and the Lease Commencement Date, as defined in the lease line of credit. This availability originally expired in July 2015, but was extended to July 2016. Interest rates on the new borrowings beginning in August 2015 under the extended agreement are based upon an initial rate of 1.88% modified by changes in the three year interest rate swaps rate as published in the Federal Reserve Statistical Release H.15, "Selected Interest Rates," between April 29, 2015 and the Lease Commencement Date, as defined in the lease line of credit. The following is a summary as of June 30, 2015 of the present value of the net minimum lease payments on capital leases under the Company's commitments: As of June 30, Capital Leases ($ in thousands) 2016 2017 2018 Total minimum payments Less amount representing interest (imputed weighted average capital lease interest rate of 2.63%) ) ​ ​ ​ ​ ​ Net minimum payments Less current portion ) ​ ​ ​ ​ ​ Present value of minimum payments, less current portion $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating leases The Company has fixed non-cancelable operating leases with terms expiring through 2022 for office space leases. Office leases generally contain renewal options and certain leases provide for scheduled rate increases over the lease terms. Rent expense was $8.1 million, $8.8 million and $7.7 million for the years ended June 30, 2015, 2014 and 2013, respectively. Future minimum lease payments under non-cancelable operating leases with initial terms of one year or more are as follows: ($ in thousands) Year Ending June 30, 2016 $ 2017 2018 2019 2020 Thereafter ​ ​ ​ ​ ​ Total future minimum lease payments $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Line of Credit
Line of Credit | 12 Months Ended |
Jun. 30, 2015 | |
Line of Credit. | |
Line of Credit | 7. Line of Credit On January 31, 2014, the Company executed a $100.0 million unsecured line of credit to be used for general corporate operating purposes with Bank of America, N.A. ("BOA"). The line has a five-year term, bears interest at the higher of the Bank's prime rate plus 0.25%, or the Federal Funds Rates plus 0.75%, or the LIBOR rate plus 1.25%; and incorporates customary financial and other covenants, including but not limited to a maximum debt leverage and a minimum fixed charge coverage ratio. As of June 30, 2015, the Company was in compliance with these covenants and the Company had no borrowings outstanding on the line of credit. The Credit Agreement contains a number of financial and other covenants that, among other things; restrict the Company and its subsidiaries' ability to incur additional indebtedness, grant liens or other security interests, make certain investments, make specified restricted payments including dividends, dispose of assets or stock including the stock of its subsidiaries, make capital expenditures above specified limits and engage in other matters customarily restricted in senior credit facilities. The agreement incorporates customary financial and other covenants, including but not limited to maximum debt leverage and minimum fixed charge coverage ratios. As of June 30, 2015 and 2014, the Company was in compliance with these covenants. |
Equity Transactions
Equity Transactions | 12 Months Ended |
Jun. 30, 2015 | |
Equity Transactions | |
Equity Transactions | 8. Equity Transactions The Company's Third Amended and Restated Certificate of Incorporation authorizes the Company to issue 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock. No Preferred Stock was issued or outstanding as of June 30, 2015 or 2014. Series A Special Stock The Company issued 2,750,000 shares of Series A Special Stock in connection with its acquisition of KC Distance Learning, Inc. The holders of the Series A Special Stock had the right to convert those shares into common stock on a one-for-one basis and for the right to vote on all matters presented to K12 stockholders, other than for the election and removal of directors, for which holders of the Series A Special Stock had no voting rights. These shares were converted into common stock on September 3, 2013 and no Series A Special Stock remains outstanding as of June 30, 2015. Common Stock Repurchases On November 4, 2013, the Board of Directors authorized the repurchase of up to $75.0 million of the Company's outstanding common stock over a two year period. Any purchases under the buyback are dependent upon business and market conditions and other factors. The stock purchases are made from time to time and may be made through a variety of methods including open market purchases and trading plans that may be adopted in accordance with the Rule 10b5-1 of the Exchange Act. For fiscal year ended June 30, 2015, the Company paid approximately $26.5 million in cash to redeem 1,307,402 shares of common stock at an average price of $20.23 per share. As of June 30, 2015 total shares purchased under the plan were 3,502,598, at an average cost of $21.41 per share, and there were no shares remaining to be repurchased under the plan. |
Stock Option Plan
Stock Option Plan | 12 Months Ended |
Jun. 30, 2015 | |
Stock Option Plan | |
Stock Option Plan | 9. Stock Option Plan The Company adopted a Stock Option Plan in May 2000 (the "Option Plan") under which, employees, outside directors and independent contractors could participate in the Company's future performance through awards of nonqualified stock options to purchase common stock. In October 2007, the Company's Board adopted the 2007 Equity Incentive Award Plan, as amended (the "2007 Plan") increasing the number of common stock shares reserved for issuance to 4,213,921 shares plus increases in the shares pursuant to an "evergreen provision" that may be issued under the 2007 Plan over the course of its ten-year term. Under the evergreen provision, the 2007 Plan provides that the number of shares available for issuance automatically increases by an amount equal to the least of i) 4% of the Company's outstanding common stock on the applicable July 1, or ii) 2,745,098 shares, or iii) a lesser number of shares as determined by the Company's Board of Directors. In fiscal year 2015, the Company's Board of Directors authorized 1,557,995 additional shares for issuance pursuant to the 2007 Plan's evergreen provision. Through June 30, 2015, the remaining aggregate number of shares of the Company's common stock authorized for future issuance under the Plan was 3,295,463. Through June 30, 2015, there were 4,160,097 shares of the Company's common stock that were issued and remain outstanding as a result of equity awards granted under the Plan. Each stock option is exercisable pursuant to the vesting schedule set forth in the stock option agreement granting such stock option, generally over four years. No stock option shall be exercisable after the expiration of its option term. The Company has granted stock options under the 2007 Plan and the Company has also granted stock options to executive officers under stand-alone agreements outside the Plan. Options granted under stand-alone agreements totaled 1,441,168 as of June 30, 2015, 2014 and 2013. There have been no grants of stock options to independent contractors. Compensation expense for all equity-based compensation awards is based on the grant-date fair value estimated in accordance with the provisions of ASC 718. The Company recognizes these compensation costs on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The Company uses the Black-Scholes option pricing model method to calculate the fair value of stock options. The use of option valuation models requires the input by management of highly subjective assumptions, including the expected stock price volatility, the expected life of the option term and forfeiture rate. These assumptions are utilized by the Company in determining the estimated fair value of stock options. The fair value of the Company's service and performance based stock options was estimated as of the date of grant using the Black-Scholes option pricing model with the following assumptions: Year Ended June 30, 2015 2014 2013 Dividend yield 0.00% 0.00% 0.00% Expected volatility 48% to 51% 49% to 55% 51% to 58% Risk-free interest rate 1.27% to 1.71% 1.23% to 1.73% 0.62% to 1.23% Expected life of the option term (in years) 4.97 to 5.11 4.82 to 5.14 4.82 to 5.14 Forfeiture rate 12% to 28% 12% to 28% 10% to 28% The fair value of the options granted for the years ended June 30, 2015, 2014 and 2013 was $4.4 million, $3.0 million and $6.9 million, respectively. This amount will be expensed over the required service period. Dividend yield —The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future. Expected volatility —Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Prior to fiscal year 2014, since the Company did not have sufficient historical data, the basis for the standard option volatility calculation is derived from known publicly traded comparable companies. The annual volatility for these companies is derived from their historical stock price data. Beginning in 2014, the Company used its own volatility rather than utilizing a peer group volatility. Risk-free interest rate —The assumed risk free rate used is a zero coupon U.S. Treasury security with a maturity that approximates the expected term of the option. Expected life of the option term —The period of time that the options granted are expected to remain unexercised. Options granted during the year have a maximum term of eight years. The Company estimates the expected life of the option term based on an average life between the dates that options become fully vested and the maximum life of options granted. Forfeiture rate —The estimated percentage of options granted that are expected to be forfeited or canceled before becoming fully vested. The Company uses a forfeiture rate based on historical forfeitures of different classification levels of employees in the Company. Stock option activity including stand-alone agreements during the years ended June 30, 2015, 2014 and 2013 are as follows: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding, June 30, 2012 $ $ Granted Exercised ) Forfeited or canceled ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, June 30, 2013 $ $ Granted Exercised ) Forfeited or canceled ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, June 30, 2014 $ $ Granted Exercised ) Forfeited or canceled ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, June 30, 2015 $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options exercisable at June 30, 2015 $ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options outstanding at June 30, 2015 included 368,437 options related to performance or market based options. There were no performance based options that vested during the year ended June 30, 2015. Stock options exercisable at June 30, 2015 included 368,575 stock options related to performance based options. Vesting of performance based options is contingent on meeting various company-wide performance goals. The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on the last day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2015. The amount of aggregate intrinsic value will change based on the fair market value of the Company's stock. The total intrinsic value of options exercised for the years ended June 30, 2015, 2014 and 2013 was $0.3 million, $7.4 million and $3.4 million, respectively. As of June 30, 2015, there was $5.9 million of total unrecognized compensation expense related to unvested stock options granted under the Stock Option Plans adopted in May 2000 and October 2007. The cost is expected to be recognized over a weighted average period of 2.70 years. During the years ended June 30, 2015, 2014 and 2013, the Company recognized $5.5 million, $7.0 million and $5.0 million, respectively, of stock based compensation expense. Included in expense for the year ended June 30, 2015, the Company recorded stock-based compensation of $0.4 million associated with accelerated vesting of option awards for executives and other employees. During the year ended June 30, 2014, the Company recorded stock-based compensation of $1.6 million associated with extending the exercise period of certain option awards to the Company's former Chief Executive Officer upon his resignation from the Board of Directors and $1.5 million associated with accelerated vesting of option awards to the Company's former Chief Executive Officer and other employees upon termination of employment. There were no similar charges in the year ended June 30, 2013. Restricted Stock Awards The Company has approved grants of restricted stock awards ("RSA") pursuant to the 2007 Plan. Under the Plan, employees, outside directors and independent contractors are able to participate in the Company's future performance through the awards of restricted stock. Each RSA vests pursuant to the vesting schedule set forth in the restricted stock agreement granting such RSA's, generally over three years. Under the 2007 Plan, there have been no awards of restricted stock to independent contractors. Restricted stock award activity during the years ended June 30, 2015, 2014 and 2013 was as follows: Shares Weighted- Average Fair Value Nonvested, June 30, 2012 $ Granted Vested ) Canceled ) ​ ​ ​ ​ ​ ​ ​ ​ Nonvested, June 30, 2013 $ Granted Vested ) Canceled ) ​ ​ ​ ​ ​ ​ ​ ​ Nonvested, June 30, 2014 $ Granted Vested ) Canceled ) ​ ​ ​ ​ ​ ​ ​ ​ Nonvested, June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ During the year ended June 30, 2015, 117,553 new performance based restricted stock awards were granted and 277,764 were outstanding at June 30, 2015. During the year ended June 30, 2015, 43,604 performance or market based awards vested. Vesting of the performance-based restricted stock awards is contingent on certain financial performance goals. The fair value of restricted stock awards granted for the year ended June 30, 2015 was $14.2 million. As of June 30, 2015, there was $16.1 million of total unrecognized compensation expense related to unvested restricted stock awards granted. The cost is expected to be recognized over a weighted average period of 1.7 years. The total fair value of shares vested during the year ended June 30, 2015 was $8.2 million. During the years ended June 30, 2015, 2014 and 2013, the Company recognized $15.8 million, $15.8 million and $9.4 million, respectively, of stock-based compensation expense related to restricted stock awards. Included in the expense for the year ended June 30, 2015, the Company recorded stock-based compensation of $2.5 million associated with accelerated vesting of equity awards to executives and other employees. During the year ended June 30, 2014, the Company recorded stock-based compensation of $3.6 million associated with accelerated vesting of equity awards to the Company's former Chief Executive Officer and other employees upon termination of employment. There were no similar charges in the year ended June 30, 2013. |
Redeemable Noncontrolling Inter
Redeemable Noncontrolling Interest | 12 Months Ended |
Jun. 30, 2015 | |
Redeemable Noncontrolling Interest | |
Redeemable Noncontrolling Interest | 10. Redeemable Noncontrolling Interest Investment in LearnBop Inc. On July 31, 2014, the Company acquired a majority interest in LearnBop Inc. ("LearnBop"), for $6.6 million in cash in return for a 51% interest in LearnBop. The purpose of the acquisition was to complement the Company's K-12 math curriculum as LearnBop has developed an adaptive math curriculum learning software. As part of this transaction, the non-controlling shareholders have a non-transferable put option, which is exercisable between July 31, 2018 and December 31, 2018 for the remaining minority interest. The price of the put option will be determined based on the trailing twelve month revenue and contribution margin as defined in the Stockholders' Agreement between the Company and LearnBop. Additionally, the Company has a non-transferable call option for the remaining minority interest at a price of $3.0 million, which becomes exercisable January 1, 2019 or thereafter. Acquisition costs incurred by the Company related to this transaction included in selling, administrative and other operating expenses were $0.1 million. The purchase price of $6.6 million was allocated to the underlying assets and liabilities based on their estimated fair value at the date of acquisition. The Company recorded goodwill of $8.1 million, which will be non-deductible for tax purposes. Recognition of goodwill is largely attributed to the value paid for LearnBop's capabilities in providing adaptive learning software for math curriculum to K-12 students. The Company has not disclosed current period or pro-forma revenue and earnings attributable to LearnBop as they are immaterial. The following table represents the purchase price allocation for LearnBop (in millions): As of July 31, 2014 Amount Current assets $ Capitalized software Goodwill Current liabilities ) Redeemable noncontrolling interest ) ​ ​ ​ ​ ​ Fair value of total consideration transferred $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Given the provision of the put rights, the redeemable noncontrolling interests are redeemable outside of the Company's control and are recorded outside of permanent equity at their redemption value in accordance with ASC 480-10-S99, Accounting for Redeemable Equity Instruments. The Company will adjust the redeemable noncontrolling interests to redemption value on each balance sheet date with changes in redemption value recognized as an adjustment to retained earnings, or in the absence of retained earnings, by adjustment to additional paid-in-capital. The noncontrolling interest is redeemable at other than fair value as the redemption value is determined based on a specified formula. The noncontrolling interest becomes redeemable after the passage of time, and therefore the Company records the carrying amount of the noncontrolling interest at the greater of 1) the initial carrying amount, increased or decreased for the noncontrolling interest's share of net income or loss, or 2) the redemption value. According to ASC 480-10-S99, Accounting for Redeemable Equity Instruments , to the extent that the noncontrolling interest holder has the contractual right to receive an amount upon share redemption that is other than fair value of such shares, only the portion of the periodic adjustment to the instrument's carrying amount that reflects redemption in excess of fair value is treated like a dividend for earnings per share computation purposes. No adjustment to the earnings per share computation was necessary as estimated fair value of the noncontrolling interest is greater than the redemption value. Middlebury College Joint Venture In May 2010, the Company entered into an agreement to establish a joint venture with Middlebury College ("Middlebury") to form Middlebury Interactive Languages LLC ("MIL"). The venture creates and distributes innovative, high-quality online language courses under the trademark Middlebury and other marks. At any time after the fifth (5th) anniversary of forming the joint venture, Middlebury may give written notice of its irrevocable election to sell all of its membership interest to the Company (put right). The purchase price for Middlebury's membership interest shall be its fair market value and the Company may, in its sole discretion, pay the purchase price in cash or shares of the Company's common stock. At June 30, 2014, MIL had not met certain milestones associated with its Language Academy summer camp programs. As such, Middlebury may exercise its option to either repurchase the camp programs at fair market value along with other contractual rights. Given the provision of the put rights, the redeemable noncontrolling interests are redeemable outside of the Company's control and are recorded outside of permanent equity at their redemption value fair value in accordance with ASC 480-10-S99, Accounting for Redeemable Equity Instruments. The Company will adjust the redeemable noncontrolling interests to redemption value on each balance sheet date with changes in redemption values recognized as an adjustment to retained earnings, or in the absence of retained earnings, by adjustment to additional paid-in-capital. On May 4, 2015, Middlebury College, under the joint venture agreement, exercised its right to require the Company to purchase all of its ownership interest in the joint venture at a mutually agreed upon fair market value or for a value to be determined by an independent valuation. The Company has the right to pay the redemption cost in cash, stock or a combination thereof, at the Company's option, which form of consideration has not yet been determined. The following is a summary of the activity of the redeemable noncontrolling interest at June 30, 2015 and 2014: (In thousands) Value Balance of redeemable noncontrolling interest at June 30, 2013 $ Net loss ) Net proceeds from noncontrolling interest contribution Adjustment to redemption value ​ ​ ​ ​ ​ Balance of redeemable noncontrolling interest at June 30, 2014 $ Net loss ) Acquisition of LearnBop Adjustment to redemption value ) ​ ​ ​ ​ ​ Balance of redeemable noncontrolling interest at June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2015 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 11. Commitments and Contingencies Litigation In the ordinary conduct of the Company's business, the Company is subject to lawsuits, arbitrations and administrative proceedings from time to time. The Company believes that the outcome of any existing or known threatened proceedings, even if determined adversely, should not have a material adverse effect on the Company's business, financial condition, liquidity or results of operations. Employment Agreements The Company has entered into employment agreements with certain executive officers that provide for severance payments and, in some cases other benefits, upon certain terminations of employment. Except for the agreements with the Company's CEO that have three year terms, all other agreements provide for employment on an "at-will" basis. If the employee is terminated for "good reason" or without cause, the employee is entitled to salary continuation, and in some cases benefit continuation, for varying periods depending on the agreement. Off-Balance Sheet Arrangements The Company provided guarantees of approximately $9.2 million related to lease commitments on the buildings for certain of the Company's Flex schools. The Company contractually guarantees that certain schools under the Company's management will not have annual operating deficits and the Company's management fees from these schools may be reduced accordingly to cover any school operating deficits. Other than these lease and operating deficit guarantees, the Company did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. |
Acquisitions and Investments
Acquisitions and Investments | 12 Months Ended |
Jun. 30, 2015 | |
Acquisitions and Investments | |
Acquisitions and Investments | 12. Acquisitions and Investments Investment in Web International Education Group Ltd. (Web) In January 2011, the Company invested $10.0 million to obtain a 20% minority interest in Web International Group, Ltd. ("Web"), a provider of English language learning centers in cities throughout China. From January 2011 through May 2013, the Company recorded its investment in Web as an available for sale debt security because of the ability to put the investment to other Web shareholders in return for the original $10.0 million investment plus interest. The Company's option to purchase no less than 51% of Web expired on March 31, 2013 and on May 6, 2013, the Company exercised its right to put its investment back to Web for return of its original $10.0 million investment plus interest of 8%, which Web was contractually required to pay by May 31, 2014, as amended. The Company reclassified this $10.0 million investment plus accrued interest of $3.2 million to a receivable, which is included in other current assets. The receivable is due and the Company accrued interest up through December 31, 2014. However, given the difficulties in expatriating money from China, and the resulting administrative hurdles related to collecting this receivable, starting January 1, 2015, the Company discontinued the accrual of interest. However, during Q4 2015, and upon further negotiation with Web, the Company wrote off the full amount of accrued interest totaling $3.2 million. This amount was recorded in interest expense, net and other, for the year ended June 30, 2015. Despite this, the Company and Web continue to mutually work toward a mechanism for collection of the principal. During the years ended June 30, 2015, 2014 and 2013, the Company recorded interest income of zero, $0.8 million and $2.0 million, respectively, associated with Web. Investment in School Mortgage On September 11, 2013, the Company issued a mortgage note ("Mortgage") lending $2.1 million to a managed school partner. The note bears interest at a fixed rate of 5.25% per year and has a term of five years. Monthly principal and interest payments will be made beginning October 2013 with a final balloon payment of $1.8 million at the term of the loan. The Mortgage is primarily secured by the underlying property. The Mortgage and ancillary documents include customary affirmative and financial covenants for secured transactions of this type. The Company has recorded this as a held to maturity investment and the current amounts are included in other current assets while the non-current amounts are included in deposits and other assets on the consolidated balance sheets. In January 2015, a Delaware judge's ruling affirmed that the school's charter would be revoked effective June 30, 2015. Therefore, the Company anticipates the school closing unless there is a change in current circumstances. The Company will exercise its rights under the existing arrangement. During June 2015, the Company engaged a 3rd party valuation firm to conduct an appraisal of the property to assess market value at June 30, 2015. The appraisal concluded a market value in excess of the note carrying value. Acquisition of LearnBop Inc. On July 31, 2014, the Company acquired a majority interest in LearnBop Inc. ("LearnBop"), for $6.6 million in cash in return for a 51% interest in LearnBop. The purpose of the acquisition is to complement the Company's K-12 math curriculum as LearnBop has developed an adaptive math curriculum learning software. As part of this transaction, the non-controlling shareholders have a non-transferable put option, which is exercisable between July 31, 2018 and December 31, 2018 for the remaining minority interest. The price of the put option will be determined based on the trailing twelve month revenue and contribution margin as defined in the Stockholders' Agreement between the Company and LearnBop. Additionally, the Company has a non-transferable call option for the remaining minority interest at a price of $3.0 million, which becomes exercisable January 1, 2019 or thereafter. Acquisition costs incurred by the Company related to this transaction included in selling, administrative and other operating expenses were $0.1 million. For further information, see Note 10. |
Sale and Deconsolidation of Ass
Sale and Deconsolidation of Assets | 12 Months Ended |
Jun. 30, 2015 | |
Sale and Deconsolidation of Assets | |
Sale and Deconsolidation of Assets | 13. Sale and Deconsolidation of Assets On June 11, 2014, the Company sold an asset group comprised of certain domestic and international business and assets including Capital Education a post-secondary education product, a brick and mortar school named the International School of Berne, and the Company's 60% interest in the Middle East Joint Venture ("Middle East JV") to Safanad Education Ventures Limited ("Safanad"). Safanad is an affiliate of Safanad Limited, the Company's former partner in the Middle East JV. There was no retained interest in the disposed businesses and, as a result of the loss of control in the sale, the Company deconsolidated the assets recording a non-operating gain of approximately $6.4 million. In aggregate, these businesses were responsible for $16.9 million in revenue for the year ended June 30, 2014. As part of the transaction, the Company entered into a services agreement to license, host and provide other related services to use its curriculum and technology for education services in limited territories and markets as defined by the agreement. In addition, the Company entered into a Transition Services Agreement (TSA) with Safanad to provide various administrative and support services. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2015 | |
Related Party Transactions | |
Related Party Transactions | 14. Related Party Transactions During the fiscal year ended June 30, 2014, in accordance with the original terms of the joint venture agreement, the Company loaned $1.0 million to its 60% owned joint venture, MIL. At June 30, 2015 and June 30, 2014, the loan totaled $4.0 million and was repayable under terms and conditions specified in the loan agreement. The loan balance and related interest are eliminated since MIL is consolidated in the Company's financial statements; however, repayment of the loan is dependent on the continued liquidity of MIL. On September 11, 2013, the Company issued a mortgage note ("Mortgage") lending $2.1 million to a managed school partner. The note bears interest at a fixed rate of 5.25% per year and has a term of five years. Monthly principal and interest payments began in October 2013 with a final balloon payment of $1.8 million at the term of the loan. The Mortgage is primarily secured by the underlying property. Also see Note 12. |
Employee Benefits
Employee Benefits | 12 Months Ended |
Jun. 30, 2015 | |
Employee Benefits | |
Employee Benefits | 15. Employee Benefits The Company maintains a 401(k) salary deferral plan (the "401(k) Plan") for its employees. Employees who have been employed for at least 30 days may voluntarily contribute to the Plan on a pretax basis, up to the maximum allowed by the Internal Revenue Service. The 401(k) Plan provides for a matching Company contribution of 25% of the first 4% of each participant's compensation, which begins following six months of service with full vesting after three years of service. The Company expensed $1.8 million, $3.7 million and $2.6 million during each of the years ended June 30, 2015, 2014 and 2013, respectively under the 401(k) Plan. |
Supplemental Disclosure of Cash
Supplemental Disclosure of Cash Flow Information | 12 Months Ended |
Jun. 30, 2015 | |
Supplemental Disclosure of Cash Flow Information | |
Supplemental Disclosure of Cash Flow Information | 16. Supplemental Disclosure of Cash Flow Information Year Ended June 30, (In thousands) 2015 2014 2013 Cash paid for interest $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for taxes $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities: Property and equipment financed by capital lease obligations $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Business Combinations —Current Assets $ $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Capitalized software development costs $ $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Goodwill $ $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Assumed liabilities $ ) $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Deferred revenue $ ) $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Common Stock Repurchases
Common Stock Repurchases | 12 Months Ended |
Jun. 30, 2015 | |
Common Stock Repurchases | |
Common Stock Repurchases | 17. Common Stock Repurchases On November 4, 2013, the Board of Directors authorized the repurchase of up to $75.0 million of the Company's outstanding common stock over a two year period. Any purchases under the buyback are dependent upon business and market conditions and other factors. The stock purchases are made from time to time and may be made through a variety of methods including open market purchases and trading plans that may be adopted in accordance with the Rule 10b5-1 of the Exchange Act. For fiscal year ended June 30, 2015, the Company paid approximately $26.5 million in cash to redeem 1,307,402 shares of common stock at an average price of $20.23 per share. As of June 30, 2015 total shares purchased under the plan were 3,502,598, at an average cost of $21.41 per share, and there were no shares remaining to be repurchased under the plan. |
Quarterly Results of Operations
Quarterly Results of Operations (Unaudited) | 12 Months Ended |
Jun. 30, 2015 | |
Quarterly Results of Operations (Unaudited) | |
Quarterly Results of Operations (Unaudited) | 18. Quarterly Results of Operations (Unaudited) The unaudited consolidated interim financial information presented should be read in conjunction with other information included in the Company's consolidated financial statements. The following unaudited consolidated financial information reflects all adjustments necessary for the fair presentation of the results of interim periods. The following tables set forth selected unaudited quarterly financial information for each of the Company's last eight quarters. 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ $ $ $ Cost and expenses Instructional costs and services Selling, administrative and other operating expenses Product development expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total costs and expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) income from operations ) ) Interest (expense), net and other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) income before income tax expense and noncontrolling interest ) ) Income tax income (expense) ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ) ) Add net loss attributable to noncontrolling interest ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income attributable to common stockholders, including Series A stockholders $ ) $ $ $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income attributable to common stockholders per share, excluding Series A stockholders: Basic $ ) $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted $ ) $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing per share amounts: Basic ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ $ $ $ Cost and expenses Instructional costs and services Selling, administrative and other operating expenses Product development expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total costs and expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ) ) Realized gain on sale of assets — — — Interest (expense), net and other ) ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income tax expense and noncontrolling interest ) ) Income tax (expense) income, net ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ) ) Add net loss attributable to noncontrolling interest ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders, including Series A stockholders $ $ $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders per share, excluding Series A stockholders: Basic $ $ $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted $ $ $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing per share amounts: Basic ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The loss before income tax expense and noncontrolling interest for the fourth quarter of fiscal year 2015 included $28.4 million of total expense from bad debt expense, the write-off of capitalized software and curriculum that will no longer be used or developed, certain computer peripherals and other fixed assets that will not be reclaimed, severance and related stock-based compensation, the write-off of previously recorded interest income, and additional provisions for inventory that the Company previously anticipated using. The loss before income tax expense and noncontrolling interest for the second quarter of fiscal year 2014 included $31.2 million of total expense from severance and related stock-based compensation, accelerated depreciation and amortization for certain curriculum, learning systems, trade names, and other fixed assets that will no longer be used or developed and additional provisions for inventory that the Company previously anticipated using. |
SCHEDULE II VALUATION AND QUALI
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Jun. 30, 2015 | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | SCHEDULE II K12 INC VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED June 30, 2015, 2014, and 2013 1. ALLOWANCE FOR DOUBTFUL ACCOUNTS Balance at Beginning of Period Additions Charged to Cost and Expenses Deductions from Allowance Balance at End of Period June 30, 2015 $ $ June 30, 2014 $ $ June 30, 2013 $ $ 2. INVENTORY RESERVE Balance at Beginning of Period Charged to Cost and Expenses Deductions, Shrinkage and Obsolescence Balance at End of Period June 30, 2015 $ $ June 30, 2014 $ $ June 30, 2013 $ — $ 3. COMPUTER RESERVE(1) Balance at Beginning of Period Additions (Deductions) Charged to Cost and Expenses Deductions, Shrinkage and Obsolescence Balance at End of Period June 30, 2015 $ $ June 30, 2014 $ $ June 30, 2013 $ $ (1) A reserve account is maintained against potential obsolescence and unreturned computers provided to the Company's students. The reserve is calculated based upon several factors including historical percentages, the net book value and the remaining useful life. During fiscal years 2015, 2014 and 2013, certain computers were written off against the reserve. 4. INCOME TAX VALUATION ALLOWANCE Balance at Beginning of Period Additions to Net Deferred Tax Asset Allowance Deductions in Net Deferred Tax Asset Allowance Balance at End of Period June 30, 2015 $ $ June 30, 2014 $ — $ June 30, 2013 $ — $ |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2015 | |
Summary of Significant Accounting Policies | |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to allowance for doubtful accounts, inventory reserves, amortization periods, the allocation of purchase price to the fair value of net assets and liabilities acquired in business combinations, fair values used in asset impairment evaluations, valuation of long-lived assets, fair value of redeemable noncontrolling interest, contingencies, income taxes and stock-based compensation expense. The Company bases its estimates on historical experience and various assumptions that it believes are reasonable under the circumstances. The results of the analysis form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. |
Revenue Recognition and Concentration of Revenues | Revenue Recognition and Concentration of Revenues Revenues are principally earned from long-term contractual agreements to provide online curriculum, books, materials, computers and management services to virtual and blended public schools, traditional schools, school districts, virtual charter schools, and private schools. In addition to providing the curriculum, books and materials, under most contracts, the Company provides management services and technology to virtual and blended public schools, including monitoring academic achievement, teacher hiring and training, compensation of school personnel, financial management, enrollment processing and procurement of curriculum, equipment and required services. The schools receive funding on a per student basis from the state in which the public school or school district is located. Shipments of materials for schools that occur in the fourth fiscal quarter and for the upcoming school year are recorded in deferred revenues. Where the Company has determined that it is the primary obligor for substantially all expenses under these contracts, the Company records the associated per student revenue received by the school from its state funding school district up to the expenses incurred in accordance with Accounting Standards Codification ("ASC") 605, Revenue Recognition . As a result of being the primary obligor, amounts recorded as revenues and school operating expenses for the years ended June 30, 2015, 2014 and 2013 were $338.2 million, $265.2 million and $247.1 million, respectively. For contracts where the Company is not the primary obligor, the Company records revenue based on its net fees earned under the contractual agreement. The Company generates revenues under turnkey management contracts with virtual and blended public schools which include multiple elements. These elements include providing each of a school's students with access to the Company's online school and the component of lessons; offline learning kits, which include books and materials to supplement the online lessons, where required, the use of a personal computer and associated reclamation services; internet access and technology support services; the services of a state-certified teacher, where required; and management and technology services necessary to operate a virtual public or blended school. In certain managed school contracts, revenue is determined directly by per enrollment funding. The Company has determined that the elements of its contracts are valuable to schools in combination, but do not have standalone value. As a result, the elements within the Company's multiple-element contracts do not qualify as separate units of accounting. Accordingly, the Company accounts for revenues under multiple element arrangements as a single unit of accounting and recognizes the entire arrangement based upon the approximate rate at which it incurs the costs associated with each element. Revenue from certain managed schools is recognized ratably over the period services are performed. To determine the pro rata amount of revenues to recognize in a fiscal quarter, management estimates the total funds each school will receive in a particular school year. Total funds for a school are primarily a function of the number of students enrolled in the school and established per enrollment funding levels which are generally published on an annual basis by the state or school district. Management reviews its estimates of funding periodically, and revise as necessary, amortizing any adjustments to earned revenues over the remaining portion of the fiscal year. Actual school funding may vary from these estimates and the impact of these differences could impact the Company's results of operations. Since the end of the school year coincides with the end of the Company's fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company's services to the schools plus other costs the schools may incur) in the calculation of school operating losses. The Company's schools reported results are subject to annual school district financial audits, which incorporate enrollment counts, funding and other routine financial audit considerations. The results of these audits are incorporated into the Company's monthly funding estimates and for the reported fiscal years ended June 30, 2014, 2013 and 2012, the Company's aggregate funding estimates differed from actual reimbursements impacting total reported revenue by approximately (0.1%), 0.2%, and (0.1%), respectively. Under the contracts where the Company provides turnkey management services to schools, the Company has generally agreed to absorb any operating losses of the schools in a given school year. These school operating losses represent the excess of costs incurred over revenues earned by the virtual or blended public school as reflected on its respective financial statements, including Company charges to the schools. To the extent a school does not receive funding for each student enrolled in the school, the school would still incur costs associated with serving the unfunded enrollment. If losses due to unfunded enrollments result in a net operating loss for the year that loss is reflected as a reduction in the revenue and net receivables that the Company collects from the school. A school net operating loss in one year does not necessarily mean the Company anticipates losing money on the entire contract with the school. However, a school operating loss may reduce the Company's ability to collect its management fees in full and recognized revenues are reduced accordingly to reflect the expected cash collections from such schools. The Company amortizes the estimated school operating loss against revenues based upon the percentage of actual revenues in the period to total estimated revenues for the fiscal year. For turnkey revenue service contracts, a school operating loss may reduce the Company's ability to collect its management fees in full though as noted it does not necessarily mean that the Company incurs a loss during the period with respect to its services to that school. The Company recognizes revenue, net of its estimated portion of school operating losses, to reflect the expected cash collections from such schools. Revenue is recognized based on the Company's performance of services under the contract, which it believes is proportionate to its incurrence of costs. The Company incurs costs directly related to the delivery of services. Most of these costs are recognized throughout the year; however, certain costs related to upfront delivery of printed materials, workbooks, laboratory materials and other items are provided at the beginning of the school year and are recognized as expense when shipped. Each state or school district has variations in the school funding formulas and methodologies that it uses to estimate funding for revenue recognition at its respective schools. As the Company builds the funding estimates for each school, it is mindful of the state definition for count dates on which reported enrollment numbers will be used for per pupil funding. The parameters the Company considers in estimating funding for revenue recognition purposes include school district count definitions, withdrawal rates, average daily attendance, special needs enrollment, student demographics, academic progress and historical completion, student location, funding caps and other state specified categorical program funding. The estimates the Company makes each period on a school-by-school basis takes into account the latest information available to it and considers material relevant information at the time of the estimate. Management periodically reviews its estimates of full-year school revenues and operating expenses and amortizes the net impact of any changes to these estimates over the remainder of the fiscal year. Actual school operating losses may vary from these estimates or revisions, and the impact of these differences could have a material impact on results of operations. Since the end of the school year coincides with the end of the Company's fiscal year, annual revenues are generally based on actual school funding and actual costs incurred (including costs for the Company's services to the schools plus other costs the schools may incur) in the calculation of school operating losses. For the years ended June 30, 2015, 2014 and 2013, the Company's revenue included a reduction for these school operating losses of $65.2 million, $49.8 million, and $64.5 million, respectively. The Company provides certain online curriculum and services to schools and school districts under subscription and perpetual license agreements. Revenue under these agreements is recognized in accordance with the ASC 605 when all of the following conditions are met: there is persuasive evidence of an arrangement; delivery has occurred or services have been rendered; the amount of fees to be paid by the customer is fixed and determinable; and the collectability of the fee is probable. Revenue from the licensing of curriculum under subscription arrangements is recognized on a ratable basis over the subscription period. Revenue from the licensing of curriculum under non-cancelable perpetual arrangements is recognized when all revenue recognition criteria have been met. Revenue from professional consulting, training and support services are deferred and recognized ratably over the service period. Other revenues are generated from individual customers who prepay and have access for one to two years to company-provided online curriculum. The Company recognizes these revenues pro rata over the maximum term of the customer contract. Revenues from associated offline learning kits are recognized upon shipment. During the years ended June 30, 2015, 2014 and 2013, approximately 86%, 88% and 86%, respectively, of the Company's revenues were recognized from schools the Company managed. The Company had a contract with one school that represented approximately 14% of revenue during 2015, approximately 13% of revenue in 2014 and about 14% of revenue in 2013. Approximately 9% of accounts receivable was attributable to a contract with one school as of June 30, 2015 and 2014, respectively. In fiscal year 2015, Agora renegotiated its service agreement and entered into a three-year contract with the Company to purchase the Company's curriculum and certain technology services, while the school board assumed daily operational responsibilities, including its charter renewal process and marketing and enrollment activities. The negative impact of this event on revenues attributable to the loss of the management component of the Agora contract, while significant, will be dependent upon the number of enrollments Agora can generate independently and the funding rates approved by the Pennsylvania legislature for cyber-charter schools in fiscal year 2016. |
Reclassifications | Reclassifications The Company has reclassified certain prior year income tax classifications to conform to the current year presentation. There was no effect on related income tax assets or liabilities, or the income statement from such reclassification. The reclassification had no effect on net cash flows. |
Shipping and Handling Costs | Shipping and Handling Costs Shipping and handling costs are expensed when incurred and are classified as instructional costs and services in the accompanying consolidated statements of operations. Shipping and handling charges invoiced to a customer are included in revenues. |
Research and Developments Costs | Research and Development Costs All research and development costs, including patent application costs, are expensed as incurred. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents generally consist of cash on hand and cash held in money market and demand deposit accounts. The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The Company maintains an allowance for uncollectible accounts primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company analyzes accounts receivable, historical percentages of uncollectible accounts and changes in payment history when evaluating the adequacy of the allowance for uncollectible accounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Actual write-offs might exceed the recorded allowance. |
Inventories | Inventories Inventories consist primarily of textbooks and curriculum materials, a majority of which are supplied to virtual and blended public schools and utilized directly by students. Inventories represent items that are purchased and are recorded at the lower of cost (first-in, first-out method) or market value. Excess and obsolete inventory reserves are established based upon the evaluation of the quantity on hand relative to demand. During the years ended June 30, 2015 and 2014, the Company increased the provision for excess and obsolete inventory by $1.4 million and $4.2 million primarily related to the decision to discontinue certain products and excess inventory relative to anticipated demand. The excess and obsolete inventory reserve at June 30, 2015 and 2014 was $2.2 million and $9.1 million, respectively. The reduction in the reserve during the year ended June 30, 2015 is primarily due to the disposal of previously reserved inventory. |
Other Current Assets | Other Current Assets Other current assets consist primarily of textbooks, curriculum materials and other supplies which are expected to be returned upon the completion of the school year. Materials not returned are expensed as part of instructional costs and services. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation expense is calculated using the straight-line method over the estimated useful life of the asset (or the lesser of the term of the lease and the estimated useful life of the asset under capital lease). Amortization of assets capitalized under capital lease arrangements is included in depreciation and amortization expense. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the asset. The Company determines the lease term in accordance with ASC 840, Leases , as the fixed non-cancelable term of the lease plus all periods for which failure to renew the lease imposes a penalty on the lessee in an amount such that renewal appears, at the inception of the lease, to be reasonably assured. Property and equipment are depreciated over the following useful lives: Useful Life Student computers 3 years Computer hardware 3 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements 3 - 12 years During the year ended June 30, 2014, the Company updated the estimate of unreturned student computers based on an analysis of recent trends of returns and utilization rates, as well as information obtained from the student computer processing systems. As a result, during the year ended 2014 the Company recorded accelerated depreciation of $6.5 million for computers that the Company estimates will not be returned by students. During the year ended June 30, 2015, the Company continued to perform this analysis and as a result recorded $5.0 million in accelerated depreciation related to this estimate. The Company recorded no accelerated depreciation related to these estimates for the year ended June 30, 2013. In addition, during the year ended June 30, 2015, the Company wrote down approximately $4.8 million of capitalized software projects after determining the assets either have no future use or are being sunset. Further, during the fiscal year ended June 30, 2015, the Company wrote down approximately $6.5 million primarily related to computer peripherals and other fixed assets shipped to students, and for which no reclamation will be processed. The Company recorded no such write-downs during the year ended June 30, 2013. |
Capitalized Software | Capitalized Software The Company develops software for internal use. Software development costs incurred during the application development stage are capitalized in accordance with ASC 350, Intangibles—Goodwill and Other . The Company amortizes these costs over the estimated useful life of the software, which is generally three years. Capitalized software development costs are stated at cost less accumulated amortization. Capitalized software development additions totaled $33.8 million, $26.6 million and $23.4 million for the years ended June 30, 2015, 2014 and 2013, respectively. During the year ended June 30, 2014, the Company wrote down approximately $3.8 million of capitalized software projects after determining the assets either have no future use or are being sunset. There were no material write-downs of capitalized software projects for the year ended June 30, 2013. Amortization expense for the years ended June 30, 2015, 2014 and 2013 was $26.8 million, $20.1 million and $14.7 million, respectively. |
Capitalized Curriculum Development Costs | Capitalized Curriculum Development Costs The Company internally develops curriculum, which is primarily provided as online content and accessed via the Internet. The Company also creates textbooks and other materials that are complementary to online content. The Company capitalizes curriculum development costs incurred during the application development stage in accordance with ASC 350. The Company capitalizes curriculum development costs during the design and deployment phases of the project. Many of the Company's new courses leverage off of proven delivery platforms and are primarily content, which has no technological hurdles. As a result, a significant portion of the Company's courseware development costs qualify for capitalization due to the concentration of its development efforts on the content of the courseware. Capitalization ends when a course is available for general release to its customers, at which time amortization of the capitalized costs begins. The period of time over which these development costs will be amortized is generally five years. Total capitalized curriculum development additions were $18.1 million, $15.4 million and $18.6 million for the years ended June 30, 2015, 2014 and 2013, respectively. These amounts are recorded on the accompanying consolidated balance sheets, net of amortization and impairment charges. Amortization charges are recorded in instructional costs and services on the accompanying consolidated statements of operations. Amortization expense for the years ended June 30, 2015, 2014 and 2013 was $20.1 million, $19.0 million and $14.3 million, respectively. The Company wrote down approximately $2.6 million and $2.2 million of capitalized curriculum development costs due to an assessment of recoverability of certain curriculum, as well as a decision to discontinue certain curriculum during the years ended June 30, 2015 and 2014. There were no material write-downs of capitalized curriculum development costs for the year ended June 30, 2013. |
Noncontrolling Interest | Noncontrolling Interest Earnings or losses attributable to other stockholders of a consolidated affiliated company are classified separately as "noncontrolling interest" in the Company's consolidated statements of operations. Net loss attributable to noncontrolling interest reflects only its share of the after-tax earnings or losses of an affiliated company. Income taxes attributable to noncontrolling interest are determined using the applicable statutory tax rates in the jurisdictions where such operations are conducted. The Company's consolidated balance sheets reflect noncontrolling interests within the equity section of the consolidated balance sheets, except for redeemable noncontrolling interests. Noncontrolling interest was classified separately in the Company's consolidated statements of stockholders' equity. Except for the redeemable non-controlling interests, the businesses with non-controlling interests were sold during fiscal 2014, and therefore the Company no longer has these non-controlling interests after the sale date. |
Redeemable Noncontrolling Interests | Redeemable Noncontrolling Interests Noncontrolling interests in subsidiaries that are redeemable outside of the Company's control for cash or other assets are classified outside of permanent equity at redeemable value, which approximates fair value. However, if the redemption amount is other than fair value (e.g. fixed or variable), the redeemable noncontrolling interest is accounted for at the fixed or variable redeemable value. The redeemable noncontrolling interests are adjusted to their redeemable value at each balance sheet date. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in-capital. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company records as goodwill the excess of purchase price over the fair value of the identifiable net assets acquired. Finite-lived intangible assets acquired in business combinations subject to amortization are recorded at their fair value. Finite-lived intangible assets include trade names, acquired customers and non-compete agreements. Such intangible assets are amortized on a straight-line basis over their estimated useful lives. As of June 30, 2015 and 2014, finite-lived intangible assets were recorded at $37.4 million and $37.4 million, respectively, and accumulated amortization of $16.2 million and $13.7 million, respectively. Amortization expense for the years ended June 30, 2015, 2014 and 2013 was $2.6 million, $8.0 million and $4.6 million, respectively. During the year ended June 30, 2014, the Company determined that based on rebranding of the Institutional Sales business, the Company fully amortized certain trade names that are no longer going to be used and recorded a $5.2 million impairment charge. There was no material impairment charge for the years ended June 30, 2015 and 2013. Future amortization of intangible assets is $2.5 million, $1.9 million, $1.9 million, $1.9 million and $1.9 million in the years ended June 30, 2016 through June 30, 2020, respectively and $10.7 million thereafter. As of June 30, 2015 and 2014, the goodwill balance was $66.2 million and $58.1 million, respectively. The Company reviews its recorded finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. ASC 350 prescribes a two-step process for impairment testing of goodwill and intangibles with indefinite lives, which is performed annually, as well as when an event triggering impairment may have occurred. ASC 350 also allows preparers to qualitatively assess goodwill impairment through a screening process which would permit companies to forgo Step 1 of their annual goodwill impairment process. This qualitative screening process will hereinafter be referred to as "Step 0". Goodwill and intangible assets deemed to have an indefinite life are tested for impairment on an annual basis, or earlier when events or changes in circumstances suggest the carrying amount may not be fully recoverable. The Company has elected to perform its annual assessment on May 31st. The Step 0 analysis focused on a number of events and circumstances that may be considered when making this qualitative assessment. Upon careful consideration of these events and circumstances, the Company recorded no goodwill impairment for the years ended June 30, 2015, 2014 and 2013. As a result of the sale of the business assets during the fiscal year ended June 30, 2014, the Company wrote off goodwill of $3.4 million and net intangibles of $0.4 million associated with these entities. On July 31, 2014, the Company acquired a 51% majority interest in LearnBop Inc. ("LearnBop"), for $6.6 million in cash (see Note 10). The following table represents goodwill additions/reductions during fiscal years ended June 30, 2015, 2014 and 2013: ($ in millions) Amount Goodwill Balance as of June 30, 2013 $ Sale of business assets ) Adjustments due to other foreign exchange translations ​ ​ ​ ​ ​ Balance as of June 30, 2014 $ Acquisition of LearnBop ​ ​ ​ ​ ​ Balance as of June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Intangible Assets : 2015 2014 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ $ ) $ $ $ ) $ Customer and distributor relationships ) ) Developed technology ) — ) — Other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ $ ) $ $ $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets include property, equipment, capitalized curriculum and software developed or obtained for internal use. In accordance with ASC 360, Property, Plant and Equipment , management reviews the Company's recorded long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset's future usability as well as on a reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between fair value and the carrying value of the asset. |
Income Taxes | Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes . Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial reporting and income tax bases of assets and liabilities using the enacted marginal tax rate. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. |
Sales Taxes | Sales Taxes Sales tax collected from customers is excluded from revenues. Collected but unremitted sales tax is included as part of accrued liabilities in the accompanying consolidated balance sheets. Revenues do not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales tax. |
Stock-Based Compensation | Stock-Based Compensation The Company estimates the fair value of share-based awards on the date of grant. The fair value of stock options is determined using the Black-Scholes option-pricing model and the fair value of restricted stock awards is based on the closing price of the Company's common stock on the date of grant. The determination of the fair value of the Company's stock option awards and restricted stock awards is based on a variety of factors including, but not limited to, the Company's common stock price, expected stock price volatility over the expected life of awards, and actual and projected exercise behavior. Additionally, the Company has estimated forfeitures for share-based awards at the dates of grant based on historical experience, adjusted for future expectation. The forfeiture estimate is revised as necessary if actual forfeitures differ from these estimates. |
Advertising and Marketing Costs | Advertising and Marketing Costs Advertising and marketing costs consist primarily of internet advertising, online marketing, direct mail, print media and television commercials and are expensed when incurred. |
Series A Special Stock | Series A Special Stock The Company issued 2,750,000 shares of Series A Special stock in July 2010 in connection with an acquisition. The holders of the Series A Special stock had the right to convert those shares into common stock on a one-for-one basis and the right to vote on all matters presented to K12 stockholders, other than for the election and removal of directors, for which holders of the Series A Special stock had no voting rights. These shares were converted into common stock on September 3, 2013 and no Series A Special stock were outstanding as of June 30, 2015 and June 30, 2014. |
Net Income Per Common Share | Net Income Per Common Share The Company calculates net income (loss) per share in accordance with ASC 260, Earnings Per Share . Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock awards. Diluted net income (loss) per share ("EPS") reflect the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options. The dilutive effect of stock options and restricted stock awards was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options and restricted stock awards, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded in additional paid-in capital when the stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company's common stock. Stock options and restricted stock awards are not included in the computation of diluted net income (loss) per share when they are antidilutive. Common stock outstanding reflected in the Company's consolidated balance sheets include restricted stock awards outstanding. Securities that may participate in undistributed net income with common stock are considered participating securities. Since the Series A Shares participate in all dividends and distributions declared or paid with respect to common stock of the Company (as if a holder of common stock), the Series A Shares meet the definition of participating security under ASC 260. All securities that meet the definition of a participating security, regardless of whether the securities are convertible, non-convertible or potential common stock securities, are included in the computation of both basic and diluted EPS (as a reduction of the numerator) using the two-class method. Under the two-class method, all undistributed earnings in a period are to be allocated to common stock and participating securities to the extent that each security may share in earnings as if all of the earnings for the period had been distributed. The following schedule presents the calculation of basic and diluted net income per share: Year Ended June 30, 2015 2014 2013 (In thousands except shares and per share data) Basic earnings per share computation: Net income attributable to common stockholders, including Series A stockholders $ $ $ Amount allocated to participating Series A stockholders $ — $ — $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income available to common stockholders—basic $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares—basic ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net income per share $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dilutive earnings per share computation: Income available to common stockholders—basic $ $ $ Amount allocated to participating Series A stockholders $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to common stockholders, including Series A stockholders $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share computation: Weighted average common shares—basic Series A Special Stock — — Effect of dilutive stock options and restricted stock awards — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding—diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted net income per share $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2015, the Company had 41,837,894 shares of common stock issued and 38,335,296 shares outstanding, which included the 2,750,000 common shares associated with the Series A special stock conversion which occurred on September 3, 2013. As of June 30, 2015, 2014 and 2013, the shares of common stock issuable in connection with stock options of 2,784,593, 558,186 and 1,181,820, respectively, were not included in the diluted income per common share calculation since their effect was antidilutive. |
Fair Value Measurements | Fair Value Measurements ASC 820, Fair Value Measurements , defines fair value as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1: Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date. Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instruments valuation. The carrying values reflected in the accompanying consolidated balance sheets for cash and cash equivalents, receivables and short and long term debt approximate their fair values. The redeemable noncontrolling interest includes the Company's joint venture with Middlebury College to form Middlebury Interactive Languages ("MIL"). Under the agreement, Middlebury College has an irrevocable election to sell all of its membership interest to the Company (put right). The fair value of the redeemable noncontrolling interest reflects management's best estimate of the redemption value of the put right. The following table summarizes certain fair value information at June 30, 2015 for assets and liabilities measured at fair value on a recurring basis. Fair Value Measurements Using: Description Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Input (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Redeemable Noncontrolling Interest in Middlebury Joint Venture $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The following table summarizes certain fair value information at June 30, 2014 for assets and liabilities measured at fair value on a recurring basis. Fair Value Measurements Using: Description Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Input (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Redeemable Noncontrolling Interest in Middlebury Joint Venture $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The following table presents activity related to the Company's fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis, for the fiscal year ended June 30, 2015. Fiscal Year Ended June 30, 2015 Description Fair Value June 30, 2014 Purchases, Issuances, and Settlements Unrealized Gains/(Losses) Fair Value June 30, 2015 (In thousands) Redeemable Noncontrolling Interest in Middlebury Joint Venture $ $ — $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total $ $ — $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The fair value of the redeemable noncontrolling interest in the Middlebury Joint Venture was accounted for in accordance with ASC 480-10-S99, Accounting for Redeemable Equity Instruments. The fair value of the Middlebury Joint Venture was based upon a valuation from a third-party valuation firm as of June 30, 2015. As of June 30, 2015 the fair value of the Middlebury Joint Venture was estimated at $6.8 million. Historically, Middlebury projections included a product that will no longer be developed by Middlebury. Further, based on several years of historical performance, growth projections for the Middlebury Joint Venture were reduced. As a result, the fair value of Middlebury significantly decreased as of the June 30, 2015 valuation date, as can be seen from the table above. Based on the results of the third-party valuation, there was no impairment of Middlebury's net assets. On May 4, 2015, Middlebury College, under the joint venture agreement, exercised its right to require the Company to purchase all of its ownership interest in the joint venture. The Company has the right to pay the redemption cost in cash, stock or a combination thereof, at the Company's option, which form of consideration has not yet been determined. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes most existing revenue recognition guidance under US GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). On July 9, 2015, the FASB voted to defer the effective date of the new revenue recognition standard by one year. Based on the Board's decision, public organizations would apply the new revenue standard to annual reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard. |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Summary of Significant Accounting Policies | |
Schedule of useful lives of property and equipment | Useful Life Student computers 3 years Computer hardware 3 years Computer software 3 - 5 years Web site development 3 years Office equipment 5 years Furniture and fixtures 7 years Leasehold improvements 3 - 12 years |
Schedule of goodwill activity | ($ in millions) Amount Goodwill Balance as of June 30, 2013 $ Sale of business assets ) Adjustments due to other foreign exchange translations ​ ​ ​ ​ ​ Balance as of June 30, 2014 $ Acquisition of LearnBop ​ ​ ​ ​ ​ Balance as of June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of intangible assets | Intangible Assets : 2015 2014 ($ in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value Trade names $ $ ) $ $ $ ) $ Customer and distributor relationships ) ) Developed technology ) — ) — Other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ $ ) $ $ $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of calculation of basic and diluted net income per share | Year Ended June 30, 2015 2014 2013 (In thousands except shares and per share data) Basic earnings per share computation: Net income attributable to common stockholders, including Series A stockholders $ $ $ Amount allocated to participating Series A stockholders $ — $ — $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income available to common stockholders—basic $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares—basic ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net income per share $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dilutive earnings per share computation: Income available to common stockholders—basic $ $ $ Amount allocated to participating Series A stockholders $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income attributable to common stockholders, including Series A stockholders $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share computation: Weighted average common shares—basic Series A Special Stock — — Effect of dilutive stock options and restricted stock awards — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares outstanding—diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted net income per share $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of assets and liabilities measured at fair value on a recurring basis | The following table summarizes certain fair value information at June 30, 2015 for assets and liabilities measured at fair value on a recurring basis. Fair Value Measurements Using: Description Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Input (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Redeemable Noncontrolling Interest in Middlebury Joint Venture $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ The following table summarizes certain fair value information at June 30, 2014 for assets and liabilities measured at fair value on a recurring basis. Fair Value Measurements Using: Description Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Input (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Redeemable Noncontrolling Interest in Middlebury Joint Venture $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total $ $ — $ — $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of activity related to fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | Fiscal Year Ended June 30, 2015 Description Fair Value June 30, 2014 Purchases, Issuances, and Settlements Unrealized Gains/(Losses) Fair Value June 30, 2015 (In thousands) Redeemable Noncontrolling Interest in Middlebury Joint Venture $ $ — $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total $ $ — $ ) $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Property and Equipment and Ca30
Property and Equipment and Capitalized Software (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Property and Equipment and Capitalized Software | |
Schedule of property and equipment | June 30, 2015 2014 (In thousands) Student computers $ $ Computer software Computer hardware Leasehold improvements Office equipment Furniture and fixtures Web site development costs State Testing computers — ​ ​ ​ ​ ​ ​ ​ ​ Less accumulated depreciation and amortization ) ) ​ ​ ​ ​ ​ ​ ​ ​ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of capitalized software | June 30, 2015 2014 (In thousands) Capitalized software costs $ $ Less accumulated depreciation and amortization ) ) ​ ​ ​ ​ ​ ​ ​ ​ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Income Taxes | |
Schedule of deferred tax assets and liabilities | June 30, 2015 2014 (In thousands) Deferred tax assets (liabilities): Net operating loss carryforward $ $ Reserves Accrued expenses Stock compensation expense Other assets Deferred rent Deferred revenue Tax basis intangibles — Federal tax credits State tax credits ​ ​ ​ ​ ​ ​ ​ ​ Total deferred tax assets ​ ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities Capitalized curriculum development ) ) Capitalized software and website development costs ) ) Property and equipment ) ) Investment in Middlebury Interactive Languages ) ) Returned materials ) ) Purchased intangibles ) ) ​ ​ ​ ​ ​ ​ ​ ​ Total deferred tax liabilities ) ) ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax liability before valuation allowance ) ) Valuation Allowance ) ) ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax liability $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported as: Current deferred tax assets $ $ Long-term deferred tax liabilities ) ) ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax liability $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of related components of the income tax expense | Year Ended June 30, 2015 2014 2013 (In thousands) Current: Federal $ $ $ State Foreign ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total current Deferred: Federal ) ) State ) ) ) Foreign ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total deferred ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total income tax expense $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of reconciliation of provision for income taxes to the income tax from applying the statutory rate | Year Ended June 30, 2015 2014 2013 U.S. federal tax at statutory rates % % % Permanent items Lobbying ) Transaction costs — ) State taxes, net of federal benefit Research and development tax credits ) ) ) Domestic production activities deduction ) ) — Change in valuation allowance — Effects of foreign operations ) ) Reserve for unrecognized tax benefits Noncontrolling Interests Other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Provision for income taxes % % % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of adjusted research and development credit carryforward | Year Ended June 30, 2015 2014 2013 (In thousands) Balance at beginning of the year $ $ $ Additions for prior year tax positions Additions for current year tax positions Reductions for prior year tax positions ) — — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at end of the year $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Lease Commitments (Tables)
Lease Commitments (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Lease Commitments | |
Summary of the present value of the net minimum lease payments due on capital leases | As of June 30, Capital Leases ($ in thousands) 2016 2017 2018 Total minimum payments Less amount representing interest (imputed weighted average capital lease interest rate of 2.63%) ) ​ ​ ​ ​ ​ Net minimum payments Less current portion ) ​ ​ ​ ​ ​ Present value of minimum payments, less current portion $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of future minimum lease payments under noncancelable operating leases | ($ in thousands) Year Ending June 30, 2016 $ 2017 2018 2019 2020 Thereafter ​ ​ ​ ​ ​ Total future minimum lease payments $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Stock Option Plan (Tables)
Stock Option Plan (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Stock Option Plan | |
Schedule of assumptions used for valuation of stock options | Year Ended June 30, 2015 2014 2013 Dividend yield 0.00% 0.00% 0.00% Expected volatility 48% to 51% 49% to 55% 51% to 58% Risk-free interest rate 1.27% to 1.71% 1.23% to 1.73% 0.62% to 1.23% Expected life of the option term (in years) 4.97 to 5.11 4.82 to 5.14 4.82 to 5.14 Forfeiture rate 12% to 28% 12% to 28% 10% to 28% |
Schedule of stock option activity | Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value Outstanding, June 30, 2012 $ $ Granted Exercised ) Forfeited or canceled ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, June 30, 2013 $ $ Granted Exercised ) Forfeited or canceled ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, June 30, 2014 $ $ Granted Exercised ) Forfeited or canceled ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding, June 30, 2015 $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options exercisable at June 30, 2015 $ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Schedule of restricted stock award activity | Shares Weighted- Average Fair Value Nonvested, June 30, 2012 $ Granted Vested ) Canceled ) ​ ​ ​ ​ ​ ​ ​ ​ Nonvested, June 30, 2013 $ Granted Vested ) Canceled ) ​ ​ ​ ​ ​ ​ ​ ​ Nonvested, June 30, 2014 $ Granted Vested ) Canceled ) ​ ​ ​ ​ ​ ​ ​ ​ Nonvested, June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Redeemable Noncontrolling Int34
Redeemable Noncontrolling Interest (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Redeemable Noncontrolling Interest | |
Schedule of purchase price allocation for LearmBop | The following table represents the purchase price allocation for LearnBop (in millions): As of July 31, 2014 Amount Current assets $ Capitalized software Goodwill Current liabilities ) Redeemable noncontrolling interest ) ​ ​ ​ ​ ​ Fair value of total consideration transferred $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Summary of the activity of the redeemable noncontrolling interest | (In thousands) Value Balance of redeemable noncontrolling interest at June 30, 2013 $ Net loss ) Net proceeds from noncontrolling interest contribution Adjustment to redemption value ​ ​ ​ ​ ​ Balance of redeemable noncontrolling interest at June 30, 2014 $ Net loss ) Acquisition of LearnBop Adjustment to redemption value ) ​ ​ ​ ​ ​ Balance of redeemable noncontrolling interest at June 30, 2015 $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Supplemental Disclosure of Ca35
Supplemental Disclosure of Cash Flow Information (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Supplemental Disclosure of Cash Flow Information | |
Schedule of supplemental disclosure of cash flow information | Year Ended June 30, (In thousands) 2015 2014 2013 Cash paid for interest $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for taxes $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of non-cash investing and financing activities: Property and equipment financed by capital lease obligations $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Business Combinations —Current Assets $ $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Capitalized software development costs $ $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Goodwill $ $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Assumed liabilities $ ) $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ —Deferred revenue $ ) $ — $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Quarterly Results of Operatio36
Quarterly Results of Operations (Tables) | 12 Months Ended |
Jun. 30, 2015 | |
Quarterly Results of Operations (Unaudited) | |
Schedule of selected unaudited quarterly financial information | 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ $ $ $ Cost and expenses Instructional costs and services Selling, administrative and other operating expenses Product development expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total costs and expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) income from operations ) ) Interest (expense), net and other ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Loss) income before income tax expense and noncontrolling interest ) ) Income tax income (expense) ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ) ) Add net loss attributable to noncontrolling interest ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income attributable to common stockholders, including Series A stockholders $ ) $ $ $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income attributable to common stockholders per share, excluding Series A stockholders: Basic $ ) $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted $ ) $ $ $ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing per share amounts: Basic ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2014 Jun 30, 2014 Mar 31, 2014 Dec 31, 2013 Sep 30, 2013 (In thousands) Consolidated Quarterly Statements of Operations Revenues $ $ $ $ Cost and expenses Instructional costs and services Selling, administrative and other operating expenses Product development expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total costs and expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ) ) Realized gain on sale of assets — — — Interest (expense), net and other ) ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income tax expense and noncontrolling interest ) ) Income tax (expense) income, net ) ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ) ) Add net loss attributable to noncontrolling interest ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders, including Series A stockholders $ $ $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders per share, excluding Series A stockholders: Basic $ $ $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted $ $ $ ) $ ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing per share amounts: Basic ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
Description of the Business (De
Description of the Business (Details) | 12 Months Ended |
Jun. 30, 2015item | |
Description of the Business | |
The number of states in which the Company manages public schools | 32 |
Basis of Presentation (Details)
Basis of Presentation (Details) | 12 Months Ended |
Jun. 30, 2015segment | |
Basis of Presentation | |
Number of operating segments | 1 |
Number of reportable business segments | 1 |
Summary of Significant Accoun39
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2012 | |
Revenue recognition | ||||
Amounts recorded as revenues and school operating expenses | $ 338.2 | $ 265.2 | $ 247.1 | |
Percentage of impact on total revenue | (0.10%) | 0.20% | (0.10%) | |
Reduction in school operating losses included in the entity's revenue | $ 65.2 | $ 49.8 | $ 64.5 | |
Minimum | ||||
Revenue recognition | ||||
Duration of contracts providing access to curriculum via the entity's Web site | 1 year | |||
Maximum | ||||
Revenue recognition | ||||
Duration of contracts providing access to curriculum via the entity's Web site | 2 years |
Summary of Significant Accoun40
Summary of Significant Accounting Policies (Details 2) $ in Millions | 12 Months Ended | ||
Jun. 30, 2015USD ($)customer | Jun. 30, 2014USD ($)customer | Jun. 30, 2013customer | |
Concentration of revenues | |||
Purchase and service agreement term | 3 years | ||
Inventories | |||
Increase in provision for excess and obsolete inventory | $ 1.4 | $ 4.2 | |
Excess and obsolete inventory reserve | $ 2.2 | $ 9.1 | |
Revenue | |||
Concentration of revenues | |||
Number of customers with concentration | customer | 1 | 1 | 1 |
Accounts Receivable | |||
Concentration of revenues | |||
Concentration risk (as a percent) | 9.00% | 9.00% | |
Number of customers with concentration | customer | 1 | 1 | |
Customer A | Revenue | Customer Concentration Risk | |||
Concentration of revenues | |||
Concentration risk (as a percent) | 14.00% | 13.00% | 14.00% |
Managed Schools | Revenue | |||
Concentration of revenues | |||
Concentration risk (as a percent) | 86.00% | 88.00% | 86.00% |
Summary of Significant Accoun41
Summary of Significant Accounting Policies (Details 3) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Capitalized Curriculum Development Costs | |||
Estimated useful life of the software | 5 years | ||
Capitalized curriculum development costs | $ 18,057 | $ 15,411 | $ 18,560 |
Amortization expense | 20,100 | 19,000 | 14,300 |
Capitalized curriculum development costs write down | $ 2,600 | 2,200 | 0 |
Student Computer | |||
Property and equipment | |||
Useful Life | 3 years | ||
Accelerated depreciation | $ 5,000 | 6,500 | 0 |
Assets written-off | $ 6,500 | 0 | |
Computer hardware | |||
Property and equipment | |||
Useful Life | 3 years | ||
Computer software | |||
Property and equipment | |||
Assets written-off | $ 4,800 | ||
Computer software | Minimum | |||
Property and equipment | |||
Useful Life | 3 years | ||
Computer software | Maximum | |||
Property and equipment | |||
Useful Life | 5 years | ||
Web site development costs | |||
Property and equipment | |||
Useful Life | 3 years | ||
Office equipment | |||
Property and equipment | |||
Useful Life | 5 years | ||
Furniture and fixtures | |||
Property and equipment | |||
Useful Life | 7 years | ||
Leasehold Improvements | Minimum | |||
Property and equipment | |||
Useful Life | 3 years | ||
Leasehold Improvements | Maximum | |||
Property and equipment | |||
Useful Life | 12 years | ||
Capitalized software | |||
Property and equipment | |||
Useful Life | 3 years | ||
Assets written-off | 3,800 | 0 | |
Capitalized software development additions | $ 33,800 | 26,600 | 23,400 |
Amortization expense | $ 26,800 | $ 20,100 | $ 14,700 |
Summary of Significant Accoun42
Summary of Significant Accounting Policies (Details 4) - USD ($) $ in Thousands | Jul. 31, 2014 | Jul. 31, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 |
Intangible Assets: | |||||
Amortization expense | $ 2,600 | $ 8,000 | $ 4,600 | ||
Impairment | 0 | 5,200 | 0 | ||
Impairment of goodwill | 0 | 0 | 0 | ||
Intangible assets written-off | 400 | ||||
Future amortization of intangible assets | |||||
2,016 | 2,500 | ||||
2,017 | 1,900 | ||||
2,018 | 1,900 | ||||
2,019 | 1,900 | ||||
2,020 | 1,900 | ||||
Thereafter | 10,700 | ||||
Rollforward of Goodwill | |||||
Balance at the beginning of the period | $ 58,088 | 58,088 | 61,400 | ||
Sale of business assets | (3,387) | ||||
Adjustments | 8,100 | 100 | |||
Balance at the end of the period | 66,160 | 58,088 | $ 61,400 | ||
Intangible Assets | |||||
Accumulated Amortization | (16,200) | (13,700) | |||
Gross Carrying Amount | 37,400 | 37,400 | |||
Net Carrying Value | 21,200 | 23,700 | |||
Trade Names | |||||
Intangible Assets | |||||
Accumulated Amortization | (5,700) | (4,600) | |||
Gross Carrying Amount | 17,500 | 17,500 | |||
Net Carrying Value | 11,800 | 12,900 | |||
Customer Relationships | |||||
Intangible Assets | |||||
Accumulated Amortization | (9,100) | (7,700) | |||
Gross Carrying Amount | 18,200 | 18,200 | |||
Net Carrying Value | 9,100 | 10,500 | |||
Developed Technology Rights | |||||
Intangible Assets | |||||
Accumulated Amortization | (1,200) | (1,200) | |||
Gross Carrying Amount | 1,200 | 1,200 | |||
Other Intangible Assets | |||||
Intangible Assets | |||||
Accumulated Amortization | (200) | (200) | |||
Gross Carrying Amount | 500 | 500 | |||
Net Carrying Value | $ 300 | $ 300 | |||
LearnBop | |||||
Intangible Assets: | |||||
Ownership percentage acquired (as a percent) | 51.00% | 51.00% | |||
Cash purchase price | $ 6,600 | $ 6,600 | |||
Rollforward of Goodwill | |||||
Balance at the end of the period | $ 8,100 | $ 8,100 |
Summary of Significant Accoun43
Summary of Significant Accounting Policies (Details 5.) - Common Stock - A | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2010shares | Jun. 30, 2015shares | Jun. 30, 2014shares | |
Series A Special Stock | |||
Issuance of Special A Stock in connection with acquisition (in shares) | 2,750,000 | 2,750,000 | |
Conversion into common stock ratio | 1 | ||
Number of Series A Special stock outstanding (in shares) | 0 | 0 |
Summary of Significant Accoun44
Summary of Significant Accounting Policies (Details 6) - USD ($) $ / shares in Units, $ in Thousands | Sep. 03, 2013 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 |
Basic earnings per share computation: | ||||||||||||
Net income attributable to common stockholders, including Series A stockholders | $ (11,580) | $ 17,013 | $ 12,331 | $ (6,776) | $ 12,356 | $ 15,949 | $ (3,665) | $ (5,040) | $ 10,988 | $ 19,600 | $ 28,111 | |
Amount allocated to participating Series A stockholders | (1,985) | |||||||||||
Income available to common stockholders-basic | $ 10,988 | $ 19,600 | $ 26,126 | |||||||||
Weighted average common shares-basic | 37,318,085 | 37,211,634 | 37,096,480 | 37,695,681 | 38,540,464 | 39,596,798 | 39,977,228 | 37,868,928 | 37,330,569 | 38,987,470 | 36,267,345 | |
Basic net income per share (in dollars per share) | $ (0.31) | $ 0.46 | $ 0.33 | $ 0.18 | $ 0.32 | $ 0.40 | $ (0.09) | $ (0.13) | $ 0.29 | $ 0.50 | $ 0.72 | |
Dilutive earnings per share computation: | ||||||||||||
Income available to common stockholders - diluted | $ 10,988 | $ 19,600 | $ 26,126 | |||||||||
Amount allocated to participating Series A stockholders | 1,985 | |||||||||||
Net income attributable to common stockholders, including Series A stockholders | $ (11,580) | $ 17,013 | $ 12,331 | $ (6,776) | $ 12,356 | $ 15,949 | $ (3,665) | $ (5,040) | $ 10,988 | $ 19,600 | $ 28,111 | |
Additional disclosures | ||||||||||||
Weighted average common shares-basic | 37,318,085 | 37,211,634 | 37,096,480 | 37,695,681 | 38,540,464 | 39,596,798 | 39,977,228 | 37,868,928 | 37,330,569 | 38,987,470 | 36,267,345 | |
Series A Special Stock | 2,750,000 | |||||||||||
Effect of dilutive stock options and restricted stock awards (in shares) | 294,856 | 243,046 | ||||||||||
Weighted average common shares outstanding-diluted | 37,318,085 | 37,408,911 | 37,160,829 | 37,695,681 | 38,742,379 | 39,596,798 | 39,977,228 | 37,868,928 | 37,625,425 | 39,230,516 | 39,017,345 | |
Diluted net income per share (in dollars per share) | $ (0.31) | $ 0.45 | $ 0.33 | $ 0.18 | $ 0.32 | $ 0.40 | $ (0.09) | $ (0.13) | $ 0.29 | $ 0.50 | $ 0.72 | |
Common stock, shares issued | 41,837,894 | 41,144,062 | 41,837,894 | 41,144,062 | ||||||||
Common stock, shares outstanding | 38,335,296 | 38,948,866 | 38,335,296 | 38,948,866 | ||||||||
Anti-dilutive shares | 2,784,593 | 558,186 | 1,181,820 | |||||||||
Common Stock | ||||||||||||
Additional disclosures | ||||||||||||
Conversion of Series A to Common Stock (in shares) | 2,750,000 | 2,750,000 |
Summary of Significant Accoun45
Summary of Significant Accounting Policies (Details 7) - USD ($) $ in Thousands | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 |
Assets and liabilities measured at fair value on a recurring basis | |||
Redeemable Noncontrolling Interest | $ 9,601 | $ 16,801 | $ 15,200 |
Measured on a recurring basis | Fair value | |||
Assets and liabilities measured at fair value on a recurring basis | |||
Total | 6,801 | 16,801 | |
Measured on a recurring basis | Fair value | Middlebury Interactive Languages LLC | |||
Assets and liabilities measured at fair value on a recurring basis | |||
Redeemable Noncontrolling Interest | 6,801 | 16,801 | |
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | |||
Assets and liabilities measured at fair value on a recurring basis | |||
Total | 6,801 | 16,801 | |
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Middlebury Interactive Languages LLC | |||
Assets and liabilities measured at fair value on a recurring basis | |||
Redeemable Noncontrolling Interest | $ 6,801 | $ 16,801 |
Summary of Significant Accoun46
Summary of Significant Accounting Policies (Details 8) - USD ($) $ in Thousands | 12 Months Ended |
Jun. 30, 2015 | |
Middlebury Interactive Languages LLC | |
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | |
Assets written-off | $ 0 |
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | |
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | |
Fair Value, beginning balance | 16,801 |
Unrealized Gains/(Losses) | (10,000) |
Fair Value, ending balance | 6,801 |
Measured on a recurring basis | Significant Unobservable Inputs (Level 3) | Middlebury Interactive Languages LLC | |
Fair value measurements categorized as Level 3 of the valuation hierarchy, valued on a recurring basis | |
Fair Value, beginning balance | 16,801 |
Unrealized Gains/(Losses) | (10,000) |
Fair Value, ending balance | $ 6,801 |
Property and Equipment and Ca47
Property and Equipment and Capitalized Software (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | $ 112,106 | $ 127,899 | |
Less accumulated depreciation and amortization | (77,699) | (79,318) | |
Property and equipment and capitalized software development, Net | 34,407 | 48,581 | |
Maintenance and repair expenses | 11,200 | 10,200 | $ 8,100 |
Selling, administrative and other operating expenses | |||
Property, equipment and capitalized software development costs | |||
Depreciation expense | 6,000 | 9,400 | 9,800 |
Student Computer | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 44,823 | 61,165 | |
Assets written-off | 6,500 | 0 | |
Student Computer | Instructional costs and services | |||
Property, equipment and capitalized software development costs | |||
Depreciation expense | 27,500 | 28,100 | 21,000 |
Amortization expense | 900 | 1,700 | 1,400 |
Computer software | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 26,368 | 30,788 | |
Assets written-off | 4,800 | ||
Computer hardware | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 17,559 | 16,377 | |
Leasehold Improvements | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 12,070 | 11,369 | |
Office equipment | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 1,515 | 1,387 | |
Furniture and fixtures | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 6,002 | 5,698 | |
Web site development costs | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 1,115 | 1,115 | |
State testing computers | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 2,654 | ||
Capitalized software | |||
Property, equipment and capitalized software development costs | |||
Property and equipment and capitalized software development, Gross | 144,285 | 109,590 | |
Less accumulated depreciation and amortization | (81,602) | (59,670) | |
Property and equipment and capitalized software development, Net | 62,683 | 49,920 | |
Assets written-off | 3,800 | 0 | |
Capitalized software | Selling, administrative and other operating expenses | |||
Property, equipment and capitalized software development costs | |||
Amortization expense | 7,400 | 1,900 | 1,700 |
Capitalized software | Instructional costs and services | |||
Property, equipment and capitalized software development costs | |||
Amortization expense | 19,400 | 18,200 | 12,200 |
Capitalized software | Product development expenses | |||
Property, equipment and capitalized software development costs | |||
Amortization expense | $ 0 | $ 0 | $ 800 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | Jun. 30, 2015 | Jun. 30, 2014 |
Deferred tax assets (liabilities): | ||
Net operating loss carryforward | $ 4,059 | $ 3,066 |
Reserves | 5,042 | 5,462 |
Accrued expenses | 9,837 | 6,953 |
Stock compensation expense | 13,113 | 12,055 |
Other assets | 1,666 | 2,232 |
Deferred rent | 1,998 | 2,074 |
Deferred revenue | 396 | 490 |
Tax basis intangibles | 576 | |
Federal tax credits | 20 | 20 |
State tax credits | 912 | 975 |
Total deferred tax assets | 37,043 | 33,903 |
Deferred tax liabilities: | ||
Capitalized curriculum development | (11,301) | (12,782) |
Capitalized software and website development costs | (22,635) | (18,743) |
Property and equipment | (1,166) | (2,313) |
Investment in Middlebury Interactive Languages | (599) | (1,361) |
Returned materials | (5,944) | (5,316) |
Purchased intangibles | (6,074) | (6,166) |
Total deferred tax liabilities | (47,719) | (46,681) |
Net deferred tax liability before valuation allowance | (10,676) | (12,778) |
Valuation Allowance | (2,791) | (1,968) |
Net deferred tax liability | (13,467) | (14,746) |
Reported as: | ||
Current deferred tax assets | 8,989 | 7,732 |
Long-term deferred tax assets (liabilities) | (22,456) | (22,478) |
Net deferred tax liability | (13,467) | $ (14,746) |
Undistributed earnings of consolidated foreign subsidiaries | 16,200 | |
U.S. deferred income tax liability attributable to undistributed earnings of consolidated foreign subsidiaries | $ 6,500 |
Income Taxes (Details 2)
Income Taxes (Details 2) $ in Millions | Jun. 30, 2015USD ($) |
Federal | |
Tax Carryforwards | |
NOL carryforward | $ 2.8 |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Current: | |||||||||||
Federal | $ 6,490 | $ 14,025 | $ 1,153 | ||||||||
State | 1,964 | 2,748 | 3,134 | ||||||||
Foreign | 450 | 56 | (34) | ||||||||
Total current | 8,904 | 16,829 | 4,253 | ||||||||
Deferred: | |||||||||||
Federal | (2,291) | (6,185) | 16,388 | ||||||||
State | (1,635) | (362) | (784) | ||||||||
Foreign | 832 | 793 | 166 | ||||||||
Total deferred | (3,094) | (5,754) | 15,770 | ||||||||
Total income tax expense | $ (6,901) | $ 10,586 | $ 8,663 | $ (6,538) | $ 7,349 | $ 11,861 | $ (4,685) | $ (3,450) | $ 5,810 | $ 11,075 | $ 20,023 |
Reconciliation to income tax at the statutory rate: | |||||||||||
U.S. Federal tax at statutory rates (as a percent) | 35.00% | 35.00% | 35.00% | ||||||||
Permanent items (as a percent) | 2.30% | 1.30% | 0.40% | ||||||||
Lobbying (as a percent) | 5.00% | (0.20%) | 1.60% | ||||||||
Transaction costs (as a percent) | (0.10%) | 0.40% | |||||||||
State taxes, net of federal benefit (as a percent) | 1.80% | 4.30% | 3.50% | ||||||||
Research and development tax credits (as a percent) | (1.70%) | (0.70%) | (0.70%) | ||||||||
Section 199 Deduction (as a percent) | (6.50%) | (6.40%) | |||||||||
Change in valuation allowances (as a percent) | 5.20% | 2.40% | |||||||||
Effects of foreign operations (as a percent) | (13.60%) | (4.00%) | 2.40% | ||||||||
Non-US ASC 740-10 Reserve (as a percent) | 6.10% | 3.90% | |||||||||
Noncontrolling interests (as a percent) | 5.50% | 1.80% | 0.90% | ||||||||
Other (as a percent) | (0.70%) | 0.60% | (0.50%) | ||||||||
Provision for income taxes | 38.40% | 37.90% | 43.00% |
Income Taxes (Details 4)
Income Taxes (Details 4) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Tax Uncertainties | |||
Interest or penalties accrued | $ 200 | ||
Balance at beginning of the year | 2,555 | $ 1,346 | $ 906 |
Additions for prior year tax returns | 137 | 702 | 302 |
Additions for current year tax positions | 989 | 507 | 138 |
Reductions for prior year tax positions | (123) | ||
Balance at end of the year | 3,558 | $ 2,555 | $ 1,346 |
Unrecognized tax benefits that would affect the effective tax rate | $ 3,600 |
Lease Commitments (Details)
Lease Commitments (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
New lease line of credit | ||
Lease commitments | ||
Interest rate (as a percent) | 2.34% | |
Computer hardware | ||
Lease commitments | ||
Net carrying value of leased student computers | $ 12,900,000 | $ 20,900,000 |
Computer hardware | Line of Credit | ||
Lease commitments | ||
Maximum borrowing capacity | 35,000,000 | 35,000,000 |
Line of credit, amount outstanding | $ 29,700,000 | $ 36,900,000 |
Interest rate, minimum (as a percent) | 2.49% | |
Interest rate, maximum (as a percent) | 3.08% | |
Payment terms of equipment lease line of credit | 36 months | |
Purchase option at the end of payment terms | $ 1 |
Lease Commitments (Details 2)
Lease Commitments (Details 2) - USD ($) $ in Thousands | Jun. 30, 2015 | Jun. 30, 2014 |
Minimum lease payments on capital leases | ||
Less current portion | $ (16,635) | $ (20,492) |
Present value of minimum payments, less current portion | 13,022 | $ 16,447 |
PNC Equipment Finance LLC Lease Line of Credit | ||
Minimum lease payments on capital leases | ||
2,016 | 17,196 | |
2,017 | 9,747 | |
2,018 | 3,526 | |
Total minimum payments | 30,469 | |
Less amount representing interest (imputed weighted average capital lease interest rate of 2.63%) | (812) | |
Net minimum payments | 29,657 | |
Less current portion | (16,635) | |
Present value of minimum payments, less current portion | $ 13,022 | |
Weighted average interest rate (as a percent) | 2.63% |
Lease Commitments (Details 3)
Lease Commitments (Details 3) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Operating leases | |||
Lease rent expense | $ 8,100 | $ 8,800 | $ 7,700 |
Future minimum lease payments under noncancelable operating leases | |||
2,016 | 8,274 | ||
2,017 | 8,096 | ||
2,018 | 7,920 | ||
2,019 | 7,863 | ||
2,020 | 6,688 | ||
Thereafter | 11,903 | ||
Total future minimum lease payments | $ 50,744 |
Line of Credit (Details)
Line of Credit (Details) - Line of Credit - USD ($) $ in Millions | Jan. 31, 2014 | Jun. 30, 2015 |
Line of credit | ||
Maximum borrowing capacity | $ 100 | |
Term of debt | 5 years | |
Line of credit, amount outstanding | $ 0 | |
Prime Rate | ||
Line of credit | ||
Interest rate base | prime rate | |
Interest rate spread added to base rate (as a percent) | 0.25% | |
Federal Funds Rate | ||
Line of credit | ||
Interest rate base | Federal Funds Rates | |
Interest rate spread added to base rate (as a percent) | 0.75% | |
LIBOR | ||
Line of credit | ||
Interest rate base | LIBOR | |
Interest rate spread added to base rate (as a percent) | 1.25% |
Equity Transactions (Details)
Equity Transactions (Details) | Jun. 30, 2015USD ($)$ / sharesshares | Nov. 04, 2013USD ($) | Jul. 31, 2010shares | Jun. 30, 2015USD ($)$ / sharesshares | Jun. 30, 2014USD ($)shares |
Equity Transactions | |||||
Common stock authorized (in shares) | 100,000,000 | 100,000,000 | 100,000,000 | ||
Preferred stock authorized (in shares) | 10,000,000 | 10,000,000 | |||
Preferred stock issued (in shares) | 0 | 0 | 0 | ||
Preferred stock outstanding (in shares) | 0 | 0 | 0 | ||
Series A Special Stock | |||||
Authorized share repurchased amount | $ | $ 75,000,000 | ||||
Share repurchase term | 2 years | ||||
Amount paid to repurchase common stock | $ | $ 26,452,000 | $ 48,548,000 | |||
Common stock redeemed (in shares) | 3,502,598 | 1,307,402 | |||
Common stock redeemed, average price (in dollars per share) | $ / shares | $ 21.41 | $ 20.23 | |||
Common stock amount yet to be repurchased under the plan | $ | $ 0 | $ 0 | |||
Maximum | |||||
Series A Special Stock | |||||
Authorized share repurchased amount | $ | $ 75,000,000 | ||||
Common Stock - A | |||||
Series A Special Stock | |||||
Issuance of Special A Stock in connection with acquisition of KC Distance Learning, Inc.(in shares) | 2,750,000 | 2,750,000 | |||
Conversion into common stock ratio | 1 | ||||
Series A Special Stock, shares outstanding | 0 | 0 |
Stock Option Plan (Details)
Stock Option Plan (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | |||
Oct. 31, 2007 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2012 | |
Employee and Non Employees Stock Option | |||||
Stock option plan | |||||
Options outstanding (in shares) | 2,914,593 | 2,578,401 | 2,893,188 | 2,949,940 | |
Vesting period | 4 years | ||||
Stock options exercisable (in Shares) | 1,941,836 | ||||
Granted (in shares) | 617,985 | 306,220 | 740,509 | ||
Assumptions used to determine fair value of stock options in the Black-Scholes option pricing model | |||||
Dividend yield (as a percent) | 0.00% | 0.00% | 0.00% | ||
Expected volatility, low end of the range (as a percent) | 48.00% | 49.00% | 51.00% | ||
Expected volatility, high end of the range (as a percent) | 51.00% | 55.00% | 58.00% | ||
Risk-free interest rate, low end of the range (as a percent) | 1.27% | 1.23% | 0.62% | ||
Risk-free interest rate, high end of the range (as a percent) | 1.71% | 1.73% | 1.23% | ||
Forfeiture rate, minimum (as a percent) | 12.00% | 12.00% | 10.00% | ||
Forfeiture rate, maximum (as a percent) | 28.00% | 28.00% | 28.00% | ||
Fair value of share-based compensation awards granted in period | $ 4.4 | $ 3 | $ 6.9 | ||
Reference rate for risk-free interest rate | zero coupon U.S. Treasury security | ||||
Maximum term of award | 8 years | ||||
Employee and Non Employees Stock Option | Independent Contractors | |||||
Stock option plan | |||||
Granted (in shares) | 0 | ||||
Employee and Non Employees Stock Option | Minimum | |||||
Assumptions used to determine fair value of stock options in the Black-Scholes option pricing model | |||||
Expected life of the option term (in years) | 4 years 11 months 19 days | 4 years 9 months 26 days | 4 years 9 months 26 days | ||
Employee and Non Employees Stock Option | Maximum | |||||
Assumptions used to determine fair value of stock options in the Black-Scholes option pricing model | |||||
Expected life of the option term (in years) | 5 years 1 month 10 days | 5 years 1 month 21 days | 5 years 1 month 21 days | ||
Stock option plan | |||||
Stock option plan | |||||
Shares reserved for issuance | 4,213,921 | 3,295,463 | |||
Term of plan | 10 years | ||||
Additional shares available for issuance | 1,557,995 | ||||
Options outstanding (in shares) | 4,160,097 | ||||
Stock options exercisable (in Shares) | 0 | ||||
Stock option plan | Scenario One | |||||
Stock option plan | |||||
Percentage of number of common stock outstanding | 4.00% | ||||
Stock option plan | Scenario Two | |||||
Stock option plan | |||||
Increase in number of shares available for issuance | 2,745,098 | ||||
Stand-alone agreements | |||||
Stock option plan | |||||
Options granted to date (in shares) | 1,441,168 | 1,441,168 | 1,441,168 |
Stock Option Plan (Details 2)
Stock Option Plan (Details 2) - Employee and Non Employees Stock Option - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2012 | |
Shares | ||||
Outstanding at the beginning of the period (in shares) | 2,578,401 | 2,893,188 | 2,949,940 | |
Granted (in shares) | 617,985 | 306,220 | 740,509 | |
Exercised (in shares) | (99,935) | (531,262) | (437,054) | |
Forfeited or canceled (in shares) | (181,858) | (89,745) | (360,207) | |
Outstanding at the end of the period (in shares) | 2,914,593 | 2,578,401 | 2,893,188 | 2,949,940 |
Weighted Average Exercise Price | ||||
Outstanding at the beginning of the period (in dollars per share) | $ 21.44 | $ 20.17 | $ 20.41 | |
Granted (in dollars per share) | 16.12 | 26.90 | 21.35 | |
Exercised (in dollars per share) | 5.68 | 17.49 | 16.59 | |
Forfeited or canceled (in dollars per share) | 29.85 | 22.63 | 28.93 | |
Outstanding at the end of the period (in dollars per share) | $ 20.33 | $ 21.44 | $ 20.17 | $ 20.41 |
Additional information | ||||
Weighted Average Remaining Contractual Life | 4 years 18 days | 4 years 6 months 26 days | 4 years 11 months 23 days | 4 years 2 months 16 days |
Aggregate Intrinsic Value | $ 88 | $ 42,754 | $ 50,038 | $ 36,916 |
Stock options exercisable (in Shares) | 1,941,836 | |||
Stock options exercisable, Weighted Average Exercise Price (in dollars per share) | $ 20.88 | |||
Stock options exercisable, Average Remaining Contractual Life | 2 years 8 months 5 days |
Stock Option Plan (Details 3)
Stock Option Plan (Details 3) - Employee and Non Employees Stock Option - USD ($) $ in Millions | 12 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2012 | |
Stock option plan | ||||
Options outstanding (in shares) | 2,914,593 | 2,578,401 | 2,893,188 | 2,949,940 |
Options exercisable (in shares) | 1,941,836 | |||
Intrinsic value of options exercised | $ 0.3 | $ 7.4 | $ 3.4 | |
Unrecognized compensation | $ 5.9 | |||
Weighted average period for recognition of total unrecognized compensation expense related to unvested stock options granted | 2 years 8 months 12 days | |||
Stock based compensation expense | $ 5.5 | 7 | 5 | |
Executives and other employees | ||||
Stock option plan | ||||
Stock based compensation expense | $ 0.4 | |||
Chief Executive Officer | ||||
Stock option plan | ||||
Stock based compensation expense | 1.6 | |||
Chief Executive Officer and other Employees | ||||
Stock option plan | ||||
Stock based compensation expense | $ 1.5 | $ 0 | ||
Vesting Based on Performance | ||||
Stock option plan | ||||
Options outstanding (in shares) | 368,437 | |||
Options vested (in shares) | 0 | |||
Options exercisable (in shares) | 368,437 |
Stock Option Plan (Details 4)
Stock Option Plan (Details 4) - Restricted Stock - $ / shares | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Stock option plan | |||
Vesting period | 3 years | ||
Shares | |||
Outstanding at the beginning of the period (in shares) | 979,595 | 928,137 | 591,637 |
Granted (in shares) | 822,698 | 704,131 | 768,951 |
Vested (in shares) | (490,309) | (559,250) | (346,309) |
Forfeited or canceled (in shares) | (66,480) | (93,423) | (86,142) |
Outstanding at the end of the period (in shares) | 1,245,504 | 979,595 | 928,137 |
Weighted-Average Fair Value | |||
Outstanding at the beginning of the period (in dollars per share) | $ 22.97 | $ 22.97 | $ 25.12 |
Granted (in dollars per share) | 17.54 | 31.49 | 21.78 |
Vested (in dollars per share) | 15.63 | 25.11 | 24 |
Forfeited or canceled (in dollars per share) | 22.46 | 26.24 | 23.01 |
Outstanding at the end of the period (in dollars per share) | $ 22.30 | $ 22.97 | $ 22.97 |
Independent Contractors | |||
Shares | |||
Granted (in shares) | 0 | ||
Vesting Based on Performance | |||
Shares | |||
Granted (in shares) | 117,553 | ||
Vested (in shares) | (43,604) | ||
Outstanding at the end of the period (in shares) | 277,764 |
Stock Option Plan (Details 5)
Stock Option Plan (Details 5) - Restricted Stock - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Stock option plan | |||
Fair value of share-based compensation awards granted in period | $ 14.2 | ||
Unrecognized compensation | $ 16.1 | ||
Weighted average period for recognition of total unrecognized compensation expense related to unvested restricted stock awards granted | 1 year 8 months 12 days | ||
Fair value of share-based compensation awards vested in period | $ 8.2 | ||
Stock based compensation expense | 15.8 | $ 15.8 | $ 9.4 |
Executives and other employees | |||
Stock option plan | |||
Stock based compensation expense | $ 2.5 | ||
Chief Executive Officer and other Employees | |||
Stock option plan | |||
Stock based compensation expense | $ 3.6 | $ 0 |
Redeemable Noncontrolling Int62
Redeemable Noncontrolling Interest (Details) - USD ($) $ in Thousands | Jul. 31, 2014 | Jul. 31, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||||
Goodwill | $ 66,160 | $ 58,088 | $ 61,400 | ||
Summary of activity of the redeemable noncontrolling interest | |||||
Balance of redeemable noncontrolling interest, beginning of period | $ 16,801 | 16,801 | 15,200 | ||
Net loss | (1,662) | (1,319) | |||
Net proceeds from investment in noncontrolling interest | 1,275 | ||||
Adjustment to redemption value | (8,038) | 1,645 | |||
Acquisition of LearnBop | 2,500 | ||||
Balance of redeemable noncontrolling interest, end of period | $ 9,601 | $ 16,801 | |||
LearnBop | |||||
Cash purchase price | $ 6,600 | $ 6,600 | |||
Ownership percentage acquired (as a percent) | 51.00% | 51.00% | |||
Period for determination of put option | 12 months | ||||
Amount of non-transferable call option remaining minority interest which becomes exercisable January 1, 2019 or thereafter | $ 3,000 | ||||
Transaction cost | 100 | $ 100 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net [Abstract] | |||||
Current assets | 200 | 200 | |||
Capitalized software | 900 | 900 | |||
Goodwill | 8,100 | 8,100 | |||
Current liabilities | (100) | (100) | |||
Redeemable noncontrolling interest | (2,500) | $ (2,500) | |||
Fair value of total consideration transferred | $ 6,600 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - Jun. 30, 2015 - USD ($) $ in Millions | Total |
Buildings of Flex schools | |
Commitments and contingencies | |
Guarantees related to lease commitments | $ 9.2 |
Employment agreement with CEO | |
Commitments and contingencies | |
Term of agreement with CEO | 3 years |
Acquisitions and Investments (D
Acquisitions and Investments (Details) - USD ($) $ in Thousands | Sep. 11, 2013 | May. 06, 2013 | Jan. 31, 2011 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 |
Investments | ||||||
Issuance of a mortgage note | $ 2,100 | |||||
Web International Education Group, Ltd.(Web) | ||||||
Investments | ||||||
Investment in Web | $ 10,000 | |||||
Ownership percentage | 20.00% | |||||
Option to purchase investment interest in investee (as a percent) | 51.00% | |||||
Interest on investment (as a percent) | 800.00% | |||||
Interest Receivable Written Off | $ 3,200 | |||||
Interest income on investment | $ 0 | $ 800 | $ 2,000 | |||
Web International Education Group, Ltd.(Web) | Other Current Assets | ||||||
Investments | ||||||
Investment reclassified | $ 10,000 | |||||
Accrued interest reclassified | $ 3,200 | |||||
School Mortgage | ||||||
Investments | ||||||
Interest on investment (as a percent) | 525.00% | |||||
Issuance of a mortgage note | $ 2,100 | |||||
Note receivable term | 5 years | |||||
Final payment due at term of loan | $ 1,800 |
Acquisitions and Investments 65
Acquisitions and Investments (Details 2) - Jul. 31, 2014 - LearnBop - USD ($) $ in Millions | Total | Total |
Acquisitions | ||
Cash purchase price | $ 6.6 | $ 6.6 |
Ownership percentage acquired (as a percent) | 51.00% | 51.00% |
Period for determination of put option | 12 months | |
Amount of non-transferable call option remaining minority interest which becomes exercisable January 1, 2019 or thereafter | $ 3 | |
Transaction cost | $ 0.1 | $ 0.1 |
Sale and Deconsolidation of A66
Sale and Deconsolidation of Assets (Details) - USD ($) $ in Millions | Jun. 11, 2014 | Jun. 30, 2014 | Jun. 30, 2015 |
Sale and Deconsolidation of Assets | |||
Gain on deconsolidation of assets | $ 6.4 | ||
Middle East JV | |||
Sale and Deconsolidation of Assets | |||
Ownership interest in joint venture (as a percent) | 0.00% | ||
Revenue from disposal of businesses | $ 16.9 | ||
Middle East JV | Safanad Education Ventures Limited | |||
Sale and Deconsolidation of Assets | |||
Ownership interest in joint venture (as a percent) | 60.00% |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | Sep. 11, 2013 | Jun. 30, 2014 | Jun. 30, 2015 |
Related Party Transactions | |||
Issuance of a mortgage note | $ 2,100 | ||
School Mortgage | |||
Related Party Transactions | |||
Issuance of a mortgage note | $ 2,100 | ||
Interest on investment (as a percent) | 525.00% | ||
Note receivable term | 5 years | ||
Final payment due at term of loan | $ 1,800 | ||
Corporate Joint Venture | |||
Related Party Transactions | |||
Amount of loan advanced | $ 1,000 | ||
Ownership interest in joint venture (as a percent) | 60.00% | ||
Amount due from joint venture | $ 4,000 | $ 4,000 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Employee Benefits | |||
Minimum length of service for participation | 30 days | ||
Maximum annual contribution as percentage of compensation | 25.00% | ||
Company matching contribution percent | 4.00% | ||
Service period required before Company matches employee contributions | 6 months | ||
Service period required before vesting | 3 years | ||
401(k) Plan expense | $ 1.8 | $ 3.7 | $ 2.6 |
Supplemental Disclosure of Ca69
Supplemental Disclosure of Cash Flow Information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Supplemental Disclosure of Cash Flow Information | |||
Cash paid for interest | $ 1,051 | $ 1,054 | $ 1,237 |
Cash paid for taxes | 19,390 | 9,134 | 1,517 |
Supplemental disclosure of non-cash investing and financing activities: | |||
Property and equipment financed by capital lease obligations | 14,654 | $ 24,132 | $ 24,703 |
Business Combinations: | |||
Current assets | 27 | ||
Capitalized curriculum development costs | 940 | ||
Intangible assets | 8,101 | ||
Goodwill | (50) | ||
Deferred revenue | $ (23) |
Common Stock Repurchases (Detai
Common Stock Repurchases (Details) - USD ($) | Jun. 30, 2015 | Nov. 04, 2013 | Jun. 30, 2015 | Jun. 30, 2014 |
Authorized share repurchased amount | ||||
Authorized share repurchased amount | $ 75,000,000 | |||
Share repurchase term | 2 years | |||
Amount paid to repurchase common stock | $ 26,452,000 | $ 48,548,000 | ||
Common stock redeemed (in shares) | 3,502,598 | 1,307,402 | ||
Common stock redeemed, average price (in dollars per share) | $ 21.41 | $ 20.23 | ||
Common stock amount yet to be repurchased under the plan | $ 0 | $ 0 | ||
Maximum | ||||
Authorized share repurchased amount | ||||
Authorized share repurchased amount | $ 75,000,000 |
Quarterly Results of Operatio71
Quarterly Results of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2013 | Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
Consolidated Quarterly Statements of Operations | |||||||||||
Revenues | $ 235,655 | $ 244,623 | $ 231,304 | $ 236,712 | $ 232,046 | $ 235,222 | $ 223,919 | $ 228,366 | $ 948,294 | $ 919,553 | $ 848,220 |
Instructional costs and services | 166,900 | 148,985 | 145,029 | 146,842 | 142,053 | 140,592 | 153,672 | 132,902 | 607,756 | 569,219 | 498,398 |
Selling, administrative, and other operating expenses | 80,756 | 64,871 | 62,557 | 99,546 | 74,847 | 64,414 | 75,753 | 98,244 | 307,730 | 313,258 | 283,032 |
Product development expenses | 4,317 | 3,337 | 3,245 | 3,482 | 2,303 | 2,831 | 3,402 | 5,684 | 14,381 | 14,220 | 21,084 |
Total costs and expenses | 251,973 | 217,193 | 210,831 | 249,870 | 219,203 | 207,837 | 232,827 | 236,830 | 929,867 | 896,697 | 802,514 |
Income from operations | (16,318) | 27,430 | 20,473 | (13,158) | 12,843 | 27,385 | (8,908) | (8,464) | 18,427 | 22,856 | 45,706 |
Realized gain on sale of assets | 6,404 | 6,404 | |||||||||
Interest (expense) income, net | (3,158) | (315) | 151 | 31 | 55 | (12) | (28) | (84) | (3,291) | (69) | 851 |
Income before income tax expense and noncontrolling interest | (19,476) | 27,115 | 20,624 | (13,127) | 19,302 | 27,373 | (8,936) | (8,548) | 15,136 | 29,191 | 46,557 |
Income tax income (expense) | 6,901 | (10,586) | (8,663) | 6,538 | (7,349) | (11,861) | 4,685 | 3,450 | (5,810) | (11,075) | (20,023) |
Net income | (12,575) | 16,529 | 11,961 | (6,589) | 11,953 | 15,512 | (4,251) | (5,098) | 9,326 | 18,116 | 26,534 |
Add net loss attributable to noncontrolling interest | 995 | 484 | 370 | (187) | 403 | 437 | 586 | 58 | 1,662 | 1,484 | 1,577 |
Net income attributable to common stockholders, including Series A stockholders | $ (11,580) | $ 17,013 | $ 12,331 | $ (6,776) | $ 12,356 | $ 15,949 | $ (3,665) | $ (5,040) | $ 10,988 | $ 19,600 | $ 28,111 |
Net (loss) income attributable to common stockholders per share, excluding Series A stockholders: | |||||||||||
Basic (in dollars per share) | $ (0.31) | $ 0.46 | $ 0.33 | $ 0.18 | $ 0.32 | $ 0.40 | $ (0.09) | $ (0.13) | $ 0.29 | $ 0.50 | $ 0.72 |
Diluted (in dollars per share) | $ (0.31) | $ 0.45 | $ 0.33 | $ 0.18 | $ 0.32 | $ 0.40 | $ (0.09) | $ (0.13) | $ 0.29 | $ 0.50 | $ 0.72 |
Weighted average shares used in computing per share amounts: | |||||||||||
Basic (in shares) | 37,318,085 | 37,211,634 | 37,096,480 | 37,695,681 | 38,540,464 | 39,596,798 | 39,977,228 | 37,868,928 | 37,330,569 | 38,987,470 | 36,267,345 |
Diluted (in shares) | 37,318,085 | 37,408,911 | 37,160,829 | 37,695,681 | 38,742,379 | 39,596,798 | 39,977,228 | 37,868,928 | 37,625,425 | 39,230,516 | 39,017,345 |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2013 | |
ALLOWANCE FOR DOUBTFUL ACCOUNTS | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | $ 3,459,928 | $ 2,560,207 | $ 1,623,974 |
Additions (Deductions) Charged to Cost and Expenses | 9,299,766 | 1,438,964 | 2,070,033 |
Deductions from Allowance | 3,102,602 | 539,243 | 1,133,800 |
Balance at End of Period | 9,657,092 | 3,459,928 | 2,560,207 |
INVENTORY RESERVE | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | 9,056,142 | 4,893,783 | 4,506,981 |
Additions (Deductions) Charged to Cost and Expenses | 1,152,679 | 4,292,974 | 386,802 |
Deductions from Allowance | 8,016,587 | 130,615 | |
Balance at End of Period | 2,192,234 | 9,056,142 | 4,893,783 |
COMPUTER RESERVE | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | 1,462,424 | 1,988,400 | 1,507,299 |
Additions (Deductions) Charged to Cost and Expenses | 379,030 | 1,862,553 | 482,188 |
Deductions from Allowance | 809,201 | 2,388,529 | 1,087 |
Balance at End of Period | 1,032,253 | 1,462,424 | 1,988,400 |
INCOME TAX VALUATION ALLOWANCE | |||
Valuation and Qualifying Account Activity | |||
Balance at Beginning of Period | 1,968,482 | 1,268,966 | 1,065,829 |
Additions to Net Deferred Tax Asset Allowance | 1,352,231 | 699,516 | 203,137 |
Deductions from Allowance | 529,680 | ||
Balance at End of Period | $ 2,791,033 | $ 1,968,482 | $ 1,268,966 |